Life Insurance A Mature Business? No Way, Says Greenberg
A prominent industry executive insists there is still a large, untapped treasure of life insurance sales left in the U.S. market.
“Theres a common belief that the life insurance industry is mature,” said Maurice R. Greenberg, chairman and CEO of American International Group Inc., at the LIMRA International annual meeting here last week.
“I dont buy it,” Greenberg said.
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.”
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.
“Well 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 Im talking about.”
Running an insurance company is a long-term business, he said. “If you run it the wrong way, youre digging your own grave.”
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 theres a change in interest rates instead of holding their portfolios to maturity. “To me, thats idiotic,” he said.
Greenberg also touched on the recent charges of bid rigging against 2 AIG property-casualty executives by Eliot Spitzer, the New York State Attorney General. Although he declined to comment at length, he insisted the 2 executives were mavericks.
Spitzer has alleged that the 2 executives gave phony competitive price bids to a p-c broker so the broker could jack up prices quoted to some corporate clients.
“If theres any wrongdoing, there should be an investigation,” Greenberg said.
But he warned against blaming an entire corporation for the actions of a few.
“Theres 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 dont engage in an era of corporate McCarthyism.”
Reproduced from National Underwriter Edition, October 21, 2004. Copyright 2004 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.