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Putting rumors to rest: finding the Truth in the Industry.


A number of newspapers are using a "truth meter" approach to the proclamations of national and local politicians, rating what has been stated as truth, mostly true, half true, mostly false, or so false it is rated "pants on fire." There are a good many statements made about and by the insurance industry which ought to undergo such metering as well. In some cases, it is advertisements in the mainstream or industry media that should be tested; in most it is political statements that warrant a veracity check.

My old Irish father often said, "If you believe everything you hear, you will eat everything you see." While his comments were primarily directed toward some delicacies such as snails, tripe, and edible weeds, the bodacious eaters on the Travel Channel would have one believing that one can thrive on everything from roaches and rats to monkey tail stew. What the poor people in famine-struck areas of the world eat would nauseate most of us, but it may be all they have. However, if they consumed the typical American diet of hot dogs, bacon burgers, and cola, then it would probably kill them just as it is killing us. The government is constantly updating what we need for a good nourishing meal, and it surely is not that. Its recommendations rate a "mostly true."

However, why do we need the government to tell us what to eat or not eat? Are we like the tour guide my wife and I had on a Scandinavian tour who said, "Vee are vaiting for our government to tell us vut to tink?" I could not imagine an American saying, "We are waiting for Washington to tell us what to think"' That would be like waiting for a jury to tell the court what is truth. One does not find truth in court cases; one finds only what facts may influence a decision when the case is adversarial. If it was not adversarial, then it would not be in court. On the contrary, we need to tell Washington what to think or do. Because of a lack of action recently, we may need to do more than tell them. We need to remind the government that most of the time its pants are on fire, and it needs to start seeking the truth.

(1) Federal insurance regulation is preferable to state regulation: probably false.

Consider, for example, the (currently inactive) movement to have the federal government assume regulation of insurance. It was the 1945 McCarran-Ferguson Act that gave the states the right to regulate insurance--as long as they did so. They have. Since Congress has a hard time even getting around to extending the National Flood Insurance Program (NFIP), at least beyond a few months, imagine how slow the industry would be if it had federal rather than state regulation. At least with most state regulators the prospect of approaching reelections keeps them busy, usually benefiting both insureds and insurers. Insureds obtain some protection against unjust rates, and insurers receive a few perks that their lobbyists have been seeking.

The benefit of state regulation is evident in our system of adversarial law. Locate any court decision in any given state, or even any federal jurisdiction, and you will find an exact opposite decision in another state or jurisdiction. Even when the U.S. Supreme Court pontificates, many states still go their own way. State jurisdiction over employee benefit programs subject to the Employee Retirement Income Security Act (ERISA) was abolished in favor of the federal courts. Has it made employee benefits disputes better or claims easier to resolve? Different approaches by different state courts can be viewed as the American way of jurisprudence. Any suggestions that Congress and federal courts can do it better rates a "half truth" to "probably false" on my veracity meter.

(2) "Flood" should be a covered peril under homeowners' forms: probably true.

One subject that is likely to raise its pretty head again following Hurricane Irene is the notion of making "flood" a standard peril under homeowners and commercial property forms. Time after time the media shows us blubbering homeowners or shopkeepers with their stuff piled in the gutter professing ruination as they had no flood insurance. Well, they did not think they were in a flood plain. Neither do I, but I want to buy flood insurance. I would prefer including that covered peril in my homeowners' policy, as it would then include additional living expense, which an NFIP policy does not.

We all certainly would pay a bit more for our property coverages if flood was included, but is that not what the concept of insurance is all about--spreading the risk? As it is, you and I have to pay for all of those non-insureds who have built in flood plains through our taxes. This year, FEMA says it is almost broke from all the billion dollar disasters of 2011. I do not live near a volcano, but have to pay for "volcanic eruption" coverage in my homeowners' policy. I doubt the roof on my Florida condo will cave in from the weight of ice, sleet or snow, but I pay for that too, as do all the insured people in Florida, New Orleans and other flood-prone areas.

Flood is considered an "uninsurable peril," yet it is already a covered peril in our auto physical damage coverage, so why not add the house and the store and the office? It would be better than the "all or nothing" of excluding water damage--all that does is create litigation. There are some reasons to not add flood to homeowners and commercial property forms, but they are weak reasons. I rate this one probably true.

(3) "Global warming" is a liberal plot by environmentalists: pants on fire.

There have been doubters for decades, and now we have them in Congress and even running for President. "No such thing as 'global warming,'" they rant. "Show us the proof." If a picture is worth a thousand words, then a picture of a largely ice-free Arctic Ocean all the way to the North Pole should do it. The insurance industry is definitely among the believers, and most insurers have already started making plans for what to do when the ocean waters rise and the climate continues to create the crazy weather patterns we have all experienced in 2011. If you think rates are high now, just wait. The hotter it gets, the higher they will go.

Yes, tree-hugging environmentalists and pro-clean air law advocates can be vociferous at times, but failure to recognize that CO2 emissions are causing the climate to change is pure stupidity, regardless of how many television meteorologists suggest otherwise. There is a difference between weather and climate, and it is climate change that is going to melt the ice caps and mountain glaciers and put New York City under ten feet or more of water. The Department of the Interior's National Park System suggests that all the glaciers in Glacier National Park will be gone within 20 years. Thankfully, I have been there twice to see them--if you have not, better hurry. Unfortunately the climate is heating up, and for those who doubt, their pants will soon be on fire, at least on my meter.

4 "The scalpel performed the surgery:" partly true.

For decades, I have suggested that while technology is a great tool, it is also hazardous if we come to rely too much upon it. Just recently there was discussion that airline pilots are forgetting how to fly the big jet aircrafts because the computer configures all but about three minutes of the flight. If the computer detects an emergency and rings an alarm, then the pilots may have forgotten what to do. This was the apparent reasoning behind the crash of an Air France Airbus over the Atlantic Ocean, and a small airliner near Buffalo, N.Y.

A recent poll revealed that people who read the New York Times in print form remembered more of the news stories than those who had read the exact same stories on the New York Times' website. As our schools (and the claims industry) are now headed toward the elimination of textbooks in favor of computerized learning and e-books, what might this bit of news suggest? Can "technology" adjust insurance claims? Can a robot perform surgery?

The answer appears to be a qualified yes. Atlanta's St. Joseph Hospital is now the home of the International College of Robotic Surgery. Using what is called the da Vinci[R] Surgical System, an increasing list of surgeries are performed by surgeons using robotic arms, scalpels and fingers. But what about adjusting? It seems that some of us can also be replaced by technological devices and systems - software can now think as well as many in the claims business. So, if you like your job, then you better be able to think faster than a robot. Otherwise, you may not be employed for much longer. I hate to admit that this is partly true. But do not resign yet--for the serious claim, the eyes, ears, and brains of a live adjuster will still be needed, just as much as the skilled hands of a surgeon.

(5) It is dangerous to drive and text: absolutely true.

The grim statistics of vehicle-related fatalities (drivers, passengers, and pedestrians) are that of the roughly 49,000 deaths that occur annually, around 37 percent are due to intoxication or drug use (mostly alcohol), but a surprising 28 percent are due to distracted drivers. This driving and phoning issue gets my goat. We have become the phone-y generation.

Yet, I also wonder why the auto insurance industry has not taken some action, like suing cell phone providers or the makers of the phones, berries, pods, and other gizmos for excluding warning labels on products, or devising technology that would prevent use in a vehicle. Why do we see those goofy ads by one particular insurer showing three stupid idiots doing stupid things with their gadgets, instead of an ad warning that the insurer might put an exclusion in a policy that if the accident is caused by distraction by an electronic device, then the policy will be void. That would get somebody's attention. Warren Buffet may be a brilliant businessman, but if I were him then I would kick the advertising agency's butt. At least that Aussie lizard says something intelligent now and then. As a reader, you may agree or disagree with my truth-meter ratings. That is good; I want to hear opposing views (and even agreeable views, if any). If I were to honestly rate myself, then I would probably not be an "absolute truth." I often must rely on statistics for my columns, and we know how unreliable those can be..."pants on fire"' Or, maybe "mostly true." What do you think?

Ken Brownlee, CPCU, is a former adjuster and risk manager based in Atlanta, Ga. He now authors and edits claim-adjusting textbooks.
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Title Annotation:Iconoclast
Author:Brownlee, Ken
Date:Nov 1, 2011
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