Compete and Thrive

I wanted to start the New Year with a discussion of the future as we launch the beginnings of our celebration of The Council’s centennial year. It seemed like the right thing to do—to talk about the future. So many things come to mind: How will the role of intermediaries change; what will they do differently; what will they look like; will markets change; will our customers change; what will risk look like; will others move into our space with some new angle or approach to protect customers and their assets.

The more I thought about the next century though, the more I felt like I was being dragged back into the19th century. How is it that an industry that claims to love competition and free markets can’t get out from under decades of rules, regulations, laws and customs that are nothing more than noncompetitive? We all talk competition, but there are many out there (of course, not Council members) who talk about it in one breath and then vehemently beat back anything that comes their way. Competition? What competition?  

For example, is there anything crazier than anti-rebating laws? Let me get this straight: If you’re a broker and you’re trying to add value to your business transaction with a customer by providing them with something they need that’s not currently prescribed in the insurance carrier’s policy, you can’t do it? Why not? So some small agent who hasn’t made any effort to invest in changing his business model can compete with you? You’ve got to be kidding! Can you imagine a law that prevents hotels from offering free Wi-Fi or hair dryers or televisions with HBO unless they charged for it and all other hotels did it, too? 

Let’s talk about licensing. My favorite. What’s more dangerous: to sell insurance or to drive an 18-wheeler full of fertilizer? Based on the requirements to be licensed as an insurer, you would think selling insurance is like dancing with the devil. The current producer licensing system is an unnecessarily costly quagmire of a process that really says nothing about the professionalism of the broker or the level of education they possess. If nothing else though, it was a good way to make it more difficult for others to come in and compete with you in our free markets. 

It was only a few years ago that we got rid of one of the biggest anticompetitive laws on the books: Ye ole countersignature laws. They were designed to essentially make it difficult to sell insurance in any jurisdiction unless you grew up there. Try this on for size: Let’s require an in-state agent to co-sign the policy of an out-of-state agent, require compensation for that co-signer with no liability for what’s in the policy and provide no real protection for the client and then let’s claim—loudly—that we’re protecting the people of our state. Brilliant.

When we first went after these rules, we got calls of outrage and were notified that a handful of members quit because they claimed they were going to lose revenue. We all know how that turned out. They are gone now, and no one got hurt. Business continues to be generated, and all is well.

Surplus lines: a hot mess. Since Dodd-Frank was passed, more people have lined up to talk about why surplus lines reform changes are bad than is worth discussion. Here’s how the current system works: If you have a client who wants to cover multiple businesses in multiple states, you have to deal with multiple state taxes, requirements, rules and regulations. Just think about whose ox is getting gored here and why people might be screaming.

Finally, I couldn’t finish without a rant about the LexisNexis Insurance Exchange. We take an issue that has been around for 40 years, and we actually create a solution that finally works. All of a sudden, there are cries of commoditization, worries about protection of data and shrieks over the highly regarded data company selected to build it. This past week I had a call with two executives of a Council firm that I have enormous respect for. Instead of listening to their usual business acumen and sophistication though, I heard a series of comments that I know came directly from a group of markets that are afraid of the Exchange. They are terrified that the world around them might change a little and that they’d have a different level of competition if this catches on. Sure the Exchange is going to cause some change, but it’s the kind of change that’s better. It’s a tool, a phone, a fax; it’s not some “Star Wars” ship that is going to suck the industry into the outer world.

So what am I wishing for in The Council’s next century? I wish for a world where you can really compete on value without regard for anticompetitive rules that are created by those less sophisticated and less interested in the business. Getting up every morning and being able to dive into a spirited marketplace should be fun. If it’s not, maybe you should consider becoming a title insurance agent.

Let’s start the New Year right. Let’s start by looking at how we can compete and how we can thrive.