Reflections from Rip Van Winkle
From 1979 to 1988 I had the pleasure of serving as executive V. P. of the Independent Insurance Agents of Arkansas. For the past fifteen years I have served as the lobbyist for the Arkansas Medical Society. When Kelley Erstine was stolen away to the University of Central Arkansas I was flattered that the Agents wanted me back …
the rest is history, and here I am again!
Like Rip Van Winkle awakening from a long sleep, I have been thrust back into the world of insurance and the trials and tribulations of the Agency System. Insurance Journal has given me the opportunity to reflect on the differences that I have observed in my short time back.
For some of the older readers it may be nostalgic. Were the good old days really that good? For the younger generation of readers I may tell of things that you can’t fathom. So here goes with my random thoughts …
In the legislative arena we literally went to war over the separation of banking and insurance …
“the tying of credit to the sale of insurance.” As the line between insurance and financial products became narrower, the federal government passed legislation that lifted the ban. Today, some of the agents that fought the hardest to keep the separation have now sold to large banking conglomerates and are enjoying the security of employment contracts. I predict that if the banks will leave them alone and let them service their clients, the public will be no less served. HOWEVER, as I observed in the medical community when the Docs became employees of managed care companies, agency principals may not like the confinement of being employees rather than owners. We may see a wave of unraveling of these corporate marriages. Today there are other issues garnering most of the attention. Fifteen years ago the McCarren- Ferguson Act, professing insurance regulation would be on a state-by-state basis, was sacred. In addition to local control, premium taxes were tremendous revenue producers for state coffers and something they would never want to relinquish. Although the companies didn’t like the inconvenience of dealing with 50 state insurance departments, most never dreamed of challenging the National Association of Insurance Commissioners. My, how times have changed. Now the major company trade associations and the largest association of financial planners and life and health agents have endorsed the idea. The Independent Insurance Agents and Brokers of America and their state affiliates are still fighting to maintain state regulation, and I think wisely so. (Having dealt with Medicare and HIPAA, I can assure you it’s easier to pick up the phone and call your state insurance commissioner than it is to contact the Secretary of a federal agency.)
Another issue that 15 years ago couldn’t be found in a “Dictionary of Common Insurance Terms” is credit scoring. Obviously, the companies couldn’t make loss history work, so they found a new way of denying coverage or increasing premiums (a little joke for my company friends). Even though there may be some validity to this controversial process, I predict that state legislatures will incorporate so many exemptions that it will become very difficult for companies to use the system with any consistency.
I won’t bore you with the never-ending battle between the insurance industry and the plaintiff lawyers. The lawyers’ role in astronomical premium increases in professional liability is the subject of national debate and their gravy train—class action suits—has the potential of paralyzing the manufacturing industry. My previous employers, the doctors, squealed about increases in malpractice premiums but they pale in comparison with the E&O quotes being delivered to my member agents.
Not since the copy machine replaced carbon paper has technology had such an impact on the insurance business. (You younger folks might need to talk to your elders about what carbon paper is. While you’re at it ask them about “white out.”) Fifteen years ago we didn’t even have fax machines! Nothing has increased business efficiency like the Internet. Gone are the volumes of rate books, a different set for every company. Now it’s a simple matter of completing the application and getting instantaneous quotes from companies. Of course, complicated risks require the expert knowledge that can only be obtained by availing yourself of every possible educational opportunity (a plug for our Association schools and seminars). The downside of the Internet is that consumers are more educated and can go directly to the companies for quotes and coverage, especially for personal lines. But in my 15-year absence one thing has not changed. Insurance is recession proof …
people are going to protect their homes, families and businesses. The successful agent continues to be the one that has the most product knowledge and forges personal relationships with his insureds.
Lynn Zeno is the Executive Vice President of the Independent Insurance Agents of Arkansas.