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Financial Storm Warnings

I come, hat in hand, again surveying the dregs left in an empty coffee cup, to see what lies ahead for our property and casualty claim-adjusting industry.

By Ken Brownlee | Updated on May 31, 2009

When I wrote the September 2008 Iconoclast column last year, I made some 2009 predictions. I foretold that the fraud reduction savings in the insurance industry might cause the dollar amount of profit — but not its percentage — to decrease. Wall Street speculators might then sell their insurance stock. Even though I could have never imagined the debacle that actually occurred, as a professional observer of the insurance industry, I should have. Therefore I come, hat in hand, again surveying the dregs left in an empty coffee cup, to see what lies ahead for our property and casualty claim-adjusting industry.

By the time this is published, most Americans will have forgotten, though likely not forgiven, AIG for paying those millions in bonuses to the very gang in London that brought the company down with its boom market in credit default swaps. Until that point, many rightly regarded AIG as one of the best insurers in the world. Now the rest of AIG will suffer because of the stupidity of a few. The late Patrick Magarick, who was a columnist for Claims Magazine for decades, was vice president of claims for American International, traveling the world on AIG’s behalf. His textbooks, including Casualty Insurance Claims, began as instruction manuals for AIG. Having known AIG for more than 40 years, I have been to many of its offices across the nation, including the New York headquarters. As a risk manager, I trusted the corporate insurance to several insurers, including National Union and Lexington. AIG companies were strong, trustworthy, and fair, though occasionally more expensive than some that were less strong, less trustworthy, and frequently unfair. Now it is in shambles, partly because nobody knew insurance history or the proper role for the industry.

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