That is an amazing story ("Wholesalers Feel the Heat," Risk & Insurance®, July 2006, p. 26). In all due respect, the amazing part is that the subject is news. Ten years ago, I was an E & S casualty manager for a major carrier. I was essentially put out of business by "the standard market." They would meet or beat my price with admitted paper (no tax), pay the producer 15 percent rather than my 10 percent, offer better terms (especially deductibles as opposed to Sirs'), write all lines in a package--the list goes on and on. Frequently, the "standard market" individual had a better grasp of coverage and could sell not only price but expertise as well. Yes, wonder where the wholesaler has been all this time.
CONSULTANTS: FORGET IT
I read the response to my "Chasing Our Tails" article (Risk & Insurance®, March 2006, p.37) by Eric Schmidbauer, in the July 2006 edition of Risk & Insurance®. I think our differences--and they are significant--boil down to matters of making advice practical, and verifiable, based on the genuine goals of company management in managing risk. I intentionally steer clear of utility considerations, because while the concept may have some deeper psychological relevance to the whole retention decision thing, it is an incredibly difficult thing to measure (as any honest economist will tell you).
Reasoning using an abstract concept like this can get circular, fast. I raise my deductible because it increases my utility. How do I know? I can only infer it from my decision to increase my retention. Does utility "explain" the decision, or vice versa? The typical approach of consultants that use the "utility" approach is trying to get at the clients "appetite for risk."
Advising on a risk management strategy based on "appetite for risk" is like advising someone on a diet plan based on their "appetite for food." To all likeminded consultants: If you can operationalize the utility approach, please do so. Otherwise, forget about it. My point about the expected value comparisons is that they are easily operationalized, and often used (rightly or wrongly), even by knowledgeable consultants.
MARK JABLONOWSKI, CPCU, ARM
CONNING RESEARCH & CONSULTING
You made very misleading statements in your article ("The Blooming of a Better Brownfield," Risk & Insurance®, Aug. 2006, p. 32). Because this one project had a coverage disagreement, you insinuate all pollution insurance is worthless. Having placed millions of pollution premiums as an insurance broker, I find your statement misinformed and unfortunate. Pollution insurance policies are not standardized and coverage varies greatly from one policy to another and carrier to carrier. It is possible the broker and insured failed to purchase appropriate pollution coverage. Disagreements on coverage occur all the time and across all types of insurance coverage. Do you think carriers should pay all claims submitted to them without question?
You have denigrated an entire industry based on one placement. The sad part is pollution insurance can be a very effective product that helps brownfield sites like this one get redeveloped.
P.S.: I know nothing of this site nor was I involved in placing the coverage.
PAUL DUGGAN, ERM
SENIOR VICE PRESIDENT
AMERICAN RISK MANAGEMENT RESOURCES
Grand Rapids, Mich.
September 15, 2006
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