“The smart companies understand that opening up pays off” in the long run, as transparency bolsters customer acquisition and retention efforts, he said.

Transparency has its perils, but only for those with something to hide. “When a company is stripped naked, fitness is not an option–you'd better be buff,” warned Mr. Tapscott, meaning that your books must be in order and your standard operating procedures squeaky clean. “You'd better be doing the right thing because everybody will be able to see what you're doing,” he said.

Even if Mr. Spitzer hadn't come along to expose industry wrongdoing, demographics would fuel demands for transparency, observed Mr. Tapscott, citing the rise of “scrutinizers” who “grew up digital.”

The 80 million or so members of the “Net Generation” coming into the market and workforce, he cautioned, have “amazing B.S. detectors, so you'd better have a single version of the truth. You can't spin these people because they're going to find out what's really going on from their own Web research and their online community. It's better if they hear the truth from you.”

Transparency also has perils for those peering into a company's guts from the outside, Mr. Tapscott pointed out. He cited two challenges–”transparency literacy,” leading to “transparency fatigue”–that have clear insurance implications. Post-Spitzer, the world's biggest brokers will inundate clients with details about complex compensation deals–and independent agents might soon follow suit, either by choice or regulatory fiat.

That's terrific–in theory–as an informed buyer is your best customer. However, will sophisticated risk managers (let alone basically clueless personal lines consumers) be able to make sense of the flood of material about to come their way on industry practices? Is there such a thing as having too much information?

It's not enough to simply strip a company naked. Stakeholders need context and instruction so they can benefit from the information being disclosed. Those insurers and brokers that rise to this challenge will be the ultimate winners, Mr. Tapscott predicts. Companies that “build transparency into their DNA,” he promised, will enjoy an “integrity premium” that will boost their bottom line.

Mr. Tapscott's message is certainly timely as disclosure is the buzzword of the day. Insurers and brokers would be wise to heed his sound advice and let the world know how they do business–not just to satisfy Sarbanes-Oxley regulations or ward off another Spitzer probe, but because it will make them more competitive and profitable.

The alternative is to follow the lead of another renowned social critic, Groucho Marx, who once quipped: “The secret of success is honesty and fair dealing. If you can fake those, you've got it made.”

Sam Friedman

Editor-In-Chief

“Don Tapscott wisely advised insurers and brokers to 'be open not because Eliot Spitzer tells you that you have to, but because it makes good business sense.'”