PAY UNDERWRITERS MORE

HOW DO YOU MAKE the insurance industry more profitable? James P. Corcoran, New York state's chief insurance regulator, gave a suggestion that makes a lot of sense. Speaking at the American Bar Association meeting in New York last week, Mr. Corcoran said the industry would improve the quality of its underwriting and, perhaps, its net income if it began paying underwriters as much or more than insurance company investment officers. Confused? Not if you think about it.

The emphasis in a business is directly related to what people get paid to do. By paying investment officers more than underwriters, Mr. Corcoran contends, the insurance industry has been pushing investments to the detriment of its primary business. The current insurance crisis, Mr. Corcoran said, is due in large part to "cash flow underwriting. The investment officers, who have more clout in insurance companies as reflected in their pay, have encouraged the underwriters to write policies to generate income for investment instead of policies that the underwriters can justify on the basis of historical risk.Mr. Cocoran said the industry should "stop playing games and get back into the insurance business. That makes sense to us.

For the full story: Log In, Register for Free or Subscribe