By CYRIL TUOHY, managing editor of Risk & Insurance®
Forget Larry Goanos' ability to underwrite. The professional lines industry's found someone who can just plain write, and there's plenty to write about, as readers will attest in his new book, "Claims Made & Reported: A Journey Through D&O, E&O and Other Professional Lines of Insurance."
What a journey it's been for the president of the Mt. Kisco, N.Y.-based Professional Indemnity Agency, the underwriting arm of HCC Insurance Holdings Inc. Who knew that working in the professional lines world could be so compelling?
Goanos began his professional lines career in earnest as chief underwriting officer with National Union in 1994 after serving as "coverage counsel" with D'Amato & Lynch starting in 1989.
After joining the New York-based Financial Institutions Group of National Union Fire Insurance Co. of Pittsburgh, Pa., a subsidiary of American International Group Inc., Goanos soon discovered how imprecise an art underwriting professional lines coverage--indeed any commercial line--would become.
Nor does he hesitate to make light-hearted fun of unwieldy company names, of which there are more than enough in the professional lines segment.
"The formal name is a mouthful, so most people simply refer to it as 'National Union,' except during legal proceedings, in coverage letters and at other times when the official designation is required," writes Goanos. "The full name, of course, is more descriptive, save for the fact that we didn't write any fire insurance when I was there. Nor were we based in Pittsburgh, Pa. This is the type of precision upon which the American insurance industry is built."
It's a refreshing revelation and makes you wonder just how fast and loose brokers and underwriters play with the language in their contracts.
Yet these are exactly the kind of reflections that help lighten the subject of professional lines underwriting and make this a unique book among the tomes of how-to manuals and the volumes of bone-dry business advice churned out by niche presses every year.
"We joke about certain carriers using the 'underwriting dice' or 'underwriting dart board' to arrive at their quotes," writes Goanos. For long-time underwriting professionals who know exactly what the author is talking about, these are the kinds of insights readers will find hard to put down.
Goanos says the book, which is replete with interesting anecdotes, is a tribute to the people he's met and worked with along the way. It is that, and more, though Goanos can also sometimes get carried away.
The author insists, for example, that none of the nation's superstar architects, none of those burly construction workers, none of those laptop-toting, college-educated engineers would be on the job were it not for the typical construction projects' unseen and unsung hero, the surety bond underwriters crunching numbers on a spreadsheet in a gray cubicle.
Well, that's going a little overboard. Does Goanos really believe that the entire construction industry depends that much on surety underwriters? Surely, builders would find alternatives to surety bonds if underwriters weren't around to meet their needs.
Goanos says the motives for this book are well placed. With a print run of about 4,000 copies from New York-based publisher Soho Publishing, this oeuvre isn't likely to end up on the New York Times Book Review bestseller list.
It doesn't need to; Goanos already has a day-time job. The proceeds from the book are earmarked for charity, the author says, and his primary goal is to get into print some of the stories that have involved professional lines insurance managers for the benefit of posterity and future generations.
"My motivation was to preserve those stories," he says. "It's a shame not to give young people a sense of who went before them."
Because professional lines coverage is arguably the most "people-driven" of all commercial insurance lines, Goanos naturally finds himself gravitating toward telling the stories of the people in the business.
Soliciting much of his information through e-mail and phone calls, Goanos has plenty to write about.
It may come as a surprise to some readers to learn that there was a time, more than 40 years ago, when D&O coverage hardly existed. At the time, when one of only three carriers quoting the coverage--CNA, AIG and Lloyd's--sought a quote, the letters "DANDO" would come across the telex. The ampersand hadn't yet made it into the directors' and officers' coverage lexicon, or perhaps was it simply that telex machines weren't transmitting ampersands?
Whatever the case, DANDO coverage was just the place--eventually--for a young Harvard-educated and ex-Liberty Mutual dandy by the name of Dave Williams, who decided property claims weren't for him after stepping into dog pooh with his Christian Dior shoes while surveying damage to a house in Massachusetts damaged by Hurricane Gloria.
Williams resigned from his job that day, but at a job fair shortly after the incident, Williams' insurance career was back on track after a Chubb recruiter convinced him that his future lay in professional lines coverage, not property claims adjusting.
For young underwriters breaking into the professional lines segment, the book warns the uninitiated: The rule among professional lines brokers and underwriters is that he or she who invites a guest--either to play a round of golf or to dine in fine restaurants--always pays, or at least offers to.
Ignore the rule and buyers are going to get stiffed at the next professional lines renewal. In one incident, after the insured invited the broker and underwriter to dinner but shied away from picking up the tab, the underwriting manager simply tacked on the cost of the meal to the renewal price, in this case a $325,000 renewal was billed at $325,462.55.
That insured got off easy, but that's not always the case, as a midsize New York bank soon found out.
In that case, occurring in the early 1990s, the bank's CEO, running late to a meeting with senior executives, declared to his general counsel who had saved him a seat at what the counsel thought was the head of the table: "Wherever I sit is the head of the table."
The underwriter, present at the meeting, took note and slapped the insured with an extra $10,000 on the renewal premium as an arrogance fee, though it's likely the CEO was too full of himself to even notice the rate had gone up.
Tacking on such "penalty premiums," Goanos hastens to add, isn't a habit of professional lines underwriters, but does make for entertaining reading.
"The vast majority of accounts are underwritten according to well-defined parameters, including objective measurements of various risk factors," Goanos writes. "And, I can assure you, a wisecrack from the CEO is not one of them."
OK, we believe you, Larry. The author notes further on in the book that insurance company managers--yes, even at Chubb--aren't above playing a practical joke or two involving HVAC system repairs and travel policies.
If there's a flaw with the book, it's that there's too much name-dropping, and it sometimes reads as if Goanos has tried too hard to mention everyone he knows. The result is a laundry list of names, which is fine if you're an insider but a burden if you're on the outside.
Two chapters merit special attention. The first is about his experience at AIG, where he began on Jan. 14, 1994. AIG's trained so many people that the stories shouldn't surprise anyone in the professional lines business.
Nevertheless, they bear repeating. The first comes from Larry English, then head of operations for AIG's domestic brokerage group.
"He said, 'Welcome to AIG. Our philosophy here is to just throw you into the water right away to see if you sink or swim. If you sink, you're done. If you swim, we throw bricks at you.' " While that may not come as news to people who've toiled through the AIG machine, which is just about everyone in the business, it is a colorful statement from a foot soldier at one of the industry's most button-downed outfits.
Thus it was for Goanos during his start with the company, when AIG was sill firmly under the grip of former chairman and CEO Maurice "Hank" Greenberg, who ran it by the numbers. "It gives you a sense of what AIG is like corporately, and the fierce focus on making the numbers," writes Goanos.
Perhaps Goanos does readers the greatest service in the more than 50 pages devoted to those who lived through or died on Sept. 11, 2001, so deeply was the commercial insurance industry affected by that day.
Between brokers Aon and Marsh, both with offices in the World Trade Center, nearly 500 employees and subcontractors lost their lives.
The account of his escape from Lower Manhattan is compelling enough. "Before I knew what was happening, the South Tower slipped down out of my sight," he writes. "It just disappeared ... like a high-rise house of cards, its base kicked out from under it by an angry child."
To professional lines brokers and underwriters working in New York's financial district at the time, these stories will have a heartfelt resonance and in the personal stories the author's collected on behalf of those still with us, the author's done an immeasurable service.
The horror of lives lost that day has already been well documented, yet Goanos does a good job in collecting more anecdotes that are bound to bring tears to the eyes of readers as they recall how colleagues and former colleagues struggled with their emotions.
One story even concerns the author himself.
"My group at AIG insured Cantor Fitzgerald for professional liability losses," writes Goanos. "I had been to Cantor's offices for a series of meetings about a year or so earlier to discuss their professional liability insurance program. When we were allowed back into our office building a week after the attacks, I pulled out the business cards of my Cantor contacts and spread them on my desk. I realized that most, if not all of these people, were dead."
In the final analysis, Goanos has written a book that will matter to the professional lines community. From the industry's struggle to survive in the early days, to the launch of new products to fill the needs of evolving industries, to the lives lost nearly a decade ago on that ghastly September morning, Goanos has done his part to shed more light on the hundreds of people involved with professional lines insurance, who they are and what they do.
The author doesn't dedicate the book, but as his publisher considers a second edition, Goanos might want to dedicate it to Joe Fine. Fine was just 34 years old and a rising star at AIG's National Union when he died in January 2000 in a car accident.
"Joe Fine at AIG ends up dying the day he was promoted," recalls Goanos. "I remember thinking that he was just a great guy, and no one knew what he did." Readers now know, and have Goanos to thank.
June 1, 2009
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