To the Point by Jack Bobo
In the course of a year I often run across issues that are of interest or importance to our business, but do not offer enough material for a full column. So, for my final piece of the year I would like to pick up a few such items. They may be disconnected, but in one way or another they do impact upon our business.
The recent election, which produced a dramatic shift in power in the next Congress, had other results that were overshadowed and went largely unnoticed. I refer to the defeat of some judges who were notorious for outrageous awards in liability lawsuits. Voters in Mississippi, in particular, struck a blow against what some call “jackpot justice.”
People are finally starting to get the message that these large and often unreasonable awards ultimately come from consumers pockets rather than the deep pockets of insurance companies.
For too long our economy has borne the burden of excessive litigation and resulting awards. A friend of mine was recently injured in an auto accident caused by the driver in the other car. It was a slam-dunk case and the insurance company was ready to pay.
A lawyer member of the family offered to help and wrote two letters in pursuit of the settlement, which the insurance company promptly made. The settlement was $100,000, and the lawyer relative kept $30,000, claiming it was a contingency fee.
There was never any doubt the claim would be paid and the lawyer got $30,000 for $500 worth of work. At least the money was kept in the family–but what a travesty.
Perhaps with the shift in power in Congress and this subtle, but significant, message from the voters, meaningful tort reform may finally become possible. At the very least, it would be a step in the right direction toward lowering health care costs.
Recent articles regarding the practices of fee-based financial planning or management reminded me of an incident that took place about 15 years ago. The Florida Association of Life Underwriters, at its annual meeting, featured a discussion panel consisting of Marshall Wolper, past president of Million Dollar Round Table and Association for Advanced Life Underwriting, Gary Froid, past president of the America Society of CLU, a prominent local fee-based financial planner, and myself.
It was a bit of a one-sided discussion with Gary, Marshall and myself lined up against the fee-based guru. The major thrust of his presentation centered on the notion that a person selling a product paying a commission could not be objective, and therefore the clients interests would likely suffer. Thus, his fee was justified many times over because of the objectivity he brought to bear on the case.
Well, as you can imagine, the discussion back and forth was very lively. But as the event wore on we finally extracted from the fee-based guru an admission that he owned three subsidiary companies–one selling insurance, one selling securities and the other real estate. The audience had no trouble figuring out where referrals from the fee-based plan wound up.