Inland Marine Underwriters Association

Inland Marine Underwriters Association

President and chief executive

An old adage warns that one should not attempt to drive a car exclusively via the rearview mirror. For the insurance industry, what has happened behind them often dictates what lies directly down the road or around the next bend. If one would have told me at the beginning of 2003 that some very large insurance companies - household names if you will - would not exist at year end, I would have questioned that person's sanity.

But that is exactly what happened. So the one change I see for the insurance industry for 2004 may not be a change at all. Rather, it might be a reaffirmation of another business adage - quality security counts. I still believe, as I stated in my response last year, that the Sept. 11 terrorist attacks took more surplus out of the industry than advertised, and that under reserving and inadequate pricing compounded the woes of an already economically stressed industry.

I also continue to question the "saving-one's-way-to-prosperity" approach that seems to be the centerpiece of most improvement plans. In many ways, the insurance industry has gotten away from underwriting - real risk evaluation underwriting - education and loss prevention, and become too focused on the expense side of the equation. While this provides an obvious quick fix, it does not offer, in my opinion, a solution for the industry's long-term issues.

I believe the insurance industry's mutual clients - agents/brokers and insureds - will ratchet up the scrutiny of both insurance and reinsurance company's financial health before placing business there. Rhetorically, what good is the cheapest coverage and/or broadest form if the insurer/reinsurer is not around to fulfill its commitment? If this prognostication proves to be valid, the insurance industry will need to adapt its ways to yet another layer of client probing: quality security.