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Insurance Industry Must Reform If Only For Its Own Sake

[ Policyholder Awareness/Preparedness Forum ]

Posted by tonyb on April 2, 2003 at 8:44:10


Washington, April 1 - The Insurance Marketplace Standards Association (IMSA) this weekend called for industry leaders to "step up and take charge" of efforts to improve regulatory procedures. IMSA Executive Director Brian Atchinson warned, "The industry needs to move quickly and decisively to fix what's wrong with the system, or it will get fixed for us by those who don't know our business as well as we do." Addressing the spring meeting of the National Association of Life Companies (NALC), he said the insurance industry needs to adopt consistent, uniform standards and regulations "with an eye on how the consumer is being treated." Noting that the marketplace has evolved beyond the existing regulatory structure, Atchinson added that the needlessly duplicative regulatory process wastes the resources of insurance regulators, consumers and the industry. "This simply can not continue," he said. "We need to find a way so that whether you are in Kansas City, MO, or Kansas City, KS, Springfield, IL, or Springfield, MA, you as a company or you as a consumer are treated the same in both states."

He praised state insurance commissioners and industry leaders who are trying to achieve regulatory reform but said overall industry action is needed. Noting that continued inconsistency in state market conduct oversight helped trigger U.S. House Financial Services Committee hearings scheduled for this spring, Atchinson said, "We have to start solving our regulatory problems or the federal government will do it for us." He predicted a greater federal role would lead to one of three alternatives: -- New national standards enforced by the states; -- New federal standards enforced by a federal agency based in Washington, DC; or -- Compliance responsibility shifting from state insurance departments back to insurance companies, where Atchinson suggested it belongs. Atchinson recommended that regulators not focus "exclusively on individual cases of compliance lapses, but rather on some measure of overall effectiveness of a company's systems and procedures." He termed as positive the initial steps of the National Association of Insurance Commissioners to develop uniform risk analysis surveys so states could decide what issues are most important and how often to examine companies.



Washington, D.C. --Industry insider, Tony Braga advocated consumers winning back personal responsibility and authority for understanding, preparing, and filing claims owed to them under insurance policies, during his recent Policy Ensurance Address given at the American Council on Consumer Interests (ACCI) 47th annual conference.

Voicing his support for claim responsibility, Mr. Braga, who has extensive insurance adjusting experience, told the conference that responsibility and authority for filing a claim should remain with the policyholder.

"Marketing has had a great impact. Back when insurance started, it was the responsibility of the policyholder to put forth the claim. That meant calculating, understanding and actually presenting a claim, so that the insurance company would respond and give consideration to that claim. As each generation proceeded we kind of did away with that idea. We didn't want to go through the trouble to understand that, and we wanted to be taken care of, especially through marketing and slogans that have us believe that we are on the same side, or we are a friendly neighbor, or in good hands..what have you. All of this leads to believe and have people expect, and really it isn't in keeping with the policy itself. However, lately now the policy has been changing. But this is the alarming part..."

Braga, warned that there have been a great many changes undermining insurance consumers' rights, though none more significant than recent changes in "Standard Policy" wording that have taken away the policyholders' authority to file a "claim" and handed that discretion over to insurance companies.

"It is no favor to have your responsibility taken away when it means losing YOUR RIGHT OF AUTHORITY, but that really comes down to responsibility and authority. They go hand in hand. You can't ignore one and have the other go on. You have to have the responsibility, and if you can't assume that responsibility, if you're unable to interpret, or understand, or calculate, or formulate, or negotiate, or whatever it takes to get that job done, then you should look to someone who doesn't have anything to lose in the transaction. Don't look to someone who has something to lose, because actually the insurance company has their own interest to protect. The more they pay, the less they keep."

In talking about the Spiral of Fraud, Braga said, "It won't end, but through a better understanding we can..we can change the spiral. It is my belief that we can change it though responsibility. If we can each assume as a consumer that we have that responsibility ourselves to make an understanding, and not turn that over to the other side, because it is the other side, regardless of the slogans and I know they don't want to be thought of as the other side, but they are the other side. In a two party contract, they are the other side, and they have nothing to lose by being that other side. I think they have more to lose by trying to wear both hats at once."

Braga said in response to a question from a member of the audience regarding fraud by insurance company representatives: "Yes, but they're just people. They're not saints, and there are people on both sides. Actually, if you think about it, the person being asked to wear two hats can't serve two masters at the same time in the same transaction. You really can't do it. Your integrity can't be divided into two...That's the problem. Trying to be an agent to both parties in the same transaction. That's wrong. Eventually that has to stop. In all other aspects of our life that's stopped. You don't see it in law with attorneys. A defense attorney and a plaintiff's attorney are separate. You would never put those two together. That one person would never represent both sides. We just haven't done it yet in insurance. It's been so long that we've accepted it this way, that no one wants to bother to undo it. But it has to be undone, eventually."

He closed with his recommendation: "The consumer definitely has a separate interest to protect. And it's only through apathy that we've gotten ourselves in this situation. We have to just find a way to break free of the slogans, and break free of the past generations. It's going to take some doing, but I really believe we have to win back our right to make a claim. I think that's essential. I think it's an intrinsic right that we should all have...We more or less have to prepare ourselves. It's hard to cheat an honest man, and if you've already taken the steps to understand what you're entitled to and you've done your homework, it's no more difficult than presenting your taxes for payment. It's probably less difficult, if you just get past the veil, just look beyond a little bit."

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