1. How fortunate, in this toxic financial climate, is the insurance business that, by and large, it markets products that the consumer, both personal and commercial, have no choice but to buy?
Of course, thanks largely to AIG's heavy involvement in the current catastrophe and, earlier, Marsh's involvement in the broker compensation mess, the industry's reputation, never stellar to begin with, is once again in the doldrums, sharing same this time with other discredited financial services providers but with fewer consequences.
That picture, though, may get a bit muddier now that the Treasury Department has announced preliminary approval for six additional insurers to participate in the government's financial rescue program. The companies are Hartford Financial Services Group, Pru Financial, Lincoln National, Allstate, Ameriprise and Principal Financial Group.
Though far less troubled than AIG, the New York
Times reported, these insurers are ailing because of the collapse in real estate pricing. "Amid the housing boom," wrote the Times reporters, "many insurers invested in complex mortgage-related securities that have since turned sour, weakening their balance sheets." Some have bought banks to make them TARP eligible. Consequently, also turning all the more sour, no doubt, will be the public's attitude toward the insurance business.
2. Speaking of bad reputations, the Eliot Spitzer redemption tour has been a true marvel to behold. Amazingly, the former crusading attorney general and governor of New York state, pre-eminent insurance basher of yore, avenging destroyer of the Greenbergs, who vitiated his own reputation in a shabby sex scandal, has suddenly emerged full blown to play the part of wise man in the current financial mess.
Spitzer, after some years in quiet rehab, is currently writing columns for Slate and doing talking-head turns on television and radio. There's even a bit of buzz about him becoming a federal insurance czar if that ever materializes in Washington. Will wonders never cease!
Then again, Americans are quite capable of forgiveness when it comes to public figures. The prime example is Teddy Kennedy who somehow got past the sordid incident at Chappaquiddick and rose to become the revered lion of the U.S. Senate he is today.
3. Even the Greenbergs, sunk by Spitzer's hand, may stand a chance to redeem themselves. Even though there's a shadow over Hanks Greenberg's later years at AIG, it doesn't appear that there's anything there that would send him or other insurance officials (save Gen Re's of course, though that was largely an internal affair) to jail. Insurers and brokers have nothing to offer quite like the world-class swindle of Ponzi-schemer Bernie Madoff, whose outrageous behavior and giant hoax set the financial world on its ear.
Whatever, these are interesting times in Insuranceland, and it'll be interesting how this all plays out.
THOMAS J. SLATTERY,
a writer on industry affairs, is managing director of Slattery-Esterkamp Communications, Baldwin, N.Y.
June 1, 2009
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