A prominent industry executive insists there is still a large, untapped treasure of life insurance sales left in the U.S. market.[@@]
“There’s a common belief that the life insurance industry is mature,” said Maurice R. (Hank) Greenberg, chairman and chief executive of American International Group Inc. at this week’s LIMRA International Conference in New York.
“I don’t buy it.”
Every day, people are entering the job market, getting married and having children, and life insurance plays an important role in each of those life stages, he said.
“The market is enormous,” Greenberg insisted.
But he lashed out at unnamed life insurance carriers that he accused of building market share at the expense of fiscal prudence. Price competition that pursues sales blindly is a serious problem for the industry, he warned.
“We’ll give up market share to companies that fail to maintain proper discipline,” he said. “In the graveyard of life insurance, there are new headstones being dug every day. Those who are doing that know who I’m talking about. “
Running an insurance is a long-term business, he argued. “If you run it the wrong way, you’re digging your own grave,” he said.
Among practices he criticized was table shaving, in which underwriters treat insureds who have slightly substandard ratings as if they were standard risks.
Running a life insurance company the correct way demands the company match its assets and liabilities closely, Greenberg said.
It also requires executives who will manage company investments prudently, he suggested. He sharply criticized investment managers who buy or sell bonds every time there’s a change in interest rates instead of holding their portfolios to maturity. “To me, that’s idiotic,” he said.
Greenberg also touched on the recent charges of bid rigging against two AIG property/casualty executives by Eliot Spitzer, the New York State Attorney General. Although he declined to comment at length, he insisted the two executives were mavericks.
Spitzer has alleged that the two executives gave phony competitive price bids to a P/C broker so the broker could jack up prices quoted to some corporate clients.
“If there’s any wrongdoing, there should be an investigation,” Greenberg insisted.
But he warned against blaming an entire corporation for the actions of a few.
“There’s a difference between companies that have corruption from the top down, companies like Enron, and corruption involving individuals,” he said. “We have 92,000 employees, and we had only a couple of people who participated. We must be careful we don’t engage in an era of corporate McCarthyism.”