Intermediaries accustomed to dumping their clients' risks at the most competitively priced insurer will now have to work harder to layer coverage among a group of carriers and/or set up formal self-insurance programs.

Insurers, meanwhile, risk losing even more of the overall risk-financing market to alternative programs, such as captives.

In the long run, however, this development might prove to be in everyone's best interest.

Unrealistic stock market returns made everyone giddy, subsidizing unsupportably cheap and generous insurance coverage. Insurers stopped underwriting. Some buyers grew lax on loss control. Many agents and brokers became mere policy peddlers and price shoppers.

Now, that's all changed. Buyers must aggressively manage their exposures to lower their cost-of-risk. Intermediaries are earning every penny they are being paid to innovate with makeshift coverage approaches and alternative market solutions. And insurers are writing insurance for a living again, holding all accounts to strict underwriting standards.

Such discipline will ultimately make this a more dynamic but less risky world. It is insurance as it ought to be.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 16, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.