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An Industry in Turmoil—Viewpoint on Timely Issues & Events

New York City, March 17, 2005 – NY Chapter of the Risk and Insurance Management Society, monthly breakfast meeting.

Speaker: Mr. Gregory V. Serio,former Superintendent of Insurance of the State of New York, and now Managing Director of Park Strategies, LLC.

Mr. Serio thinks the insurance industry is in such turmoil that it needs a patron saint, like St. Patrick, to convert the insurance pagans, drive the snakes from the insurance landscape and bridge the gap of distrust separating insurance providers from their customers.

Here’s our turmoil recap: AIG and Marsh executives confess to bid-rigging. Marsh announces the end of contingent commissions. Their CEO is fired and share price plummets. Over two thousand employees are laid off. Marsh pays $850 million and Aon $190 million to settle with Mr. Spitzer. Inquiries widen to other brokerages and insurance companies. In the two weeks following his talk. AIG’s Chairman and CEO are forced to resign. AIG's CFO is fired for taking the fifth in an investigation of questionable accounting practices.

 

On a personal level this St. Patrick's Day, Mr. Serio is “bitterly disappointed” in the market misbehavior perpetrated by a few powerful and greedy insurance executives. He also is disappointed with the risk management community. The former insurance superintendent said that when he asked the Risk and Insurance Management Society for comment about the Spitzer indictments, someone replied by asking, “Why do we need to comment about that?”

Now a management consultant, here is what Mr. Serio thinks buyers need to do:

  1. Establish relationships with the regulatory community, the way insurance companies and brokers have done.
  2. Elevate the status of their risk managers. “The notion of a chief risk officer is past due,” he declared.
  3. “Disclose everything.” The Marsh settlement with Mr. Spitzer outlines what is acceptable.
  4. Risk managers should use their relationships with brokers to reform the way brokers and insurance companies do business.

If you’re not sure you are paying fair prices for your insurance, our Insurance Benchmarking service can provide you an objective point of reference. Or, if you have lost faith in the advice or services your broker has been giving you, visit our Services section to read about our Diagnostic Review service.