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Looking Beyond The Horizon

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For many years the American Council of Life Insurance (now Insurers) maintained a trend analysis program (TAP). The function of the TAP committee was to look beyond the current horizon in an effort to spot trends that afford either a challenge or an opportunity for our business.

They did not monitor legislation itself–that was the function of government affairs people–but they did seek out trends or events that might infringe upon current or future legislation.

The heart of the TAP effort was the dozens of home office people scattered about the country that provided input to the committee. Each of these people was assigned a specific publication to read and monitor, in the hope of spotting an issue from outside our own business that might some day impact upon us. Each year an annual meeting was held for these monitors, and the collective wisdom thus assembled tried to sort out the various issues observed and evaluate them in order of their likelihood of impact and their importance.

I was privileged to serve on the TAP steering committee for a number of years and thought it was a very worthwhile exercise. Unfortunately, the program was eliminated in the wave of cost-cutting measures the ACLI experienced about 15 or 20 years ago. At the time, the people closest to TAP felt this was a typical “pennywise and pound foolish” decision.

Given the amount of volunteer labor involved, it struck me as an extraordinarily cost-effective way to gather vital information affecting every aspect of our business, so I was also saddened to see it go.

Service on the TAP program did, however, condition me to the importance of looking over the horizon and I continue to try to do so. It is in that context that I raise a concern today that could have a serious impact on our business. In the spirit of TAP, I offer the following events:

ITEM: A close friend experienced two very small claims and his homeowners policy was canceled by a major direct carrier and after 20 years of being claim free. Other carriers showed no interest after learning of the cancellation.

ITEM: The homeowners association where my sister lives was canceled. This occurred following a premium increase from $15,000 to $48,000. The association experienced one significant claim. Individual homeowners had to scramble for individual coverage.

ITEM: Another close friend had $1,700 worth of tools stolen from his truck. The agent advised him not to file a claim lest he be canceled. He had had no other claims.

ITEM: The homeowners association policy where my granddaughter lives experienced a premium increase from $5,577 to $12,684. They had one small claim in five years.

ITEM: The man who mows my lawn weekly hit a rock with his mower and it flew into one of my windows causing $800 of damage. He was insured but declined to file a claim for fear of cancellation.

ITEM: My own Property & Casualty Insurance is up for renewal and my agent suggests that I raise the deductible to $2,500. I have had no claim in years, but implicit in the recommendation is the idea that it would be hazardous to file a smaller claim if I had one.

The level of anger is rising and people are saying, “What good is insurance if when you use it, you get canceled.” They are not asking what good is property and casualty insurance rather, just “insurance,” and that includes all of us. The public has never really made a distinction between various lines of insurance–we are all tarred with the same brush.

The concern I have is this: Is what is happening to people I know a pandemic condition? It would be hard for me to believe that the carriers are picking on just my circle of friends.

Add to the foregoing the runaway cost of health insurance. Local teachers are complaining that despite an annual pay raise, they are taking home less pay because of the increase in health insurance premiums. True, we are not the cause of these increases, but we are the messengers regarding rising health care costs, and its the messenger that usually gets killed.

I am not for a minute suggesting that rate increases are not justified. Claims (including 9/11) are high, and investment yields are not offsetting underwriting losses. Health care costs are rising as our population ages and as expectations from our system (including malpractice litigation) increase beyond reasonable limits.

The only point that I am trying to make is that public opinion can consume you like a forest fire, and we need to start setting some backfires to ward off a PR disaster. It clearly has been demonstrated in the past that unfavorable public attitudes toward insurance can affect the amount of hostile legislation introduced in Congress and the states, P/E ratios of companies and the morale of agents.

AT&Ts Arthur Page, considered the father of corporate public relations, said, “If the reputation of business is good enough with the public, no one representing the public–whether in the press, politics or any other capacity, will be hostile to it.”

We also have learned from bitter experience that the reverse is also true. Its later than you think. We need a PR offensive now–fire prevention in a sense.

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 25, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.