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Carlin's act sprang a bit too quickly to mind when my editor asked me to write about what some would regard as the equally hilarious subject of "insurance innovation."

To quote no less an authority than myself, "In the history of ideas, insurance is clearly in the front rank. It introduced the notion of security into human commercial and personal affairs. It was a truly innovative and transforming development in that life afterwards was markedly different, and for the better, than it was before. But what's happened since?"

But maybe that's too harsh a judgment. There was, after all, the homeowners policy, as well as the comprehensive general liability policy and the commercial umbrella policies. But weren't these snipped together with scissors and a paste pot? Didn't they just integrate previous pieces of coverages?

More importantly, there was the captive movement, in fact the broader explosion in the alternative markets. CAT bonds and sidecars have dragged in other players, like Goldman Sachs, to expand capacity and solve problems.

Most of this activity, I think, has been driven less by agents, brokers and underwriters than by consumers, the risk managers for sure who needed to place risk in an overall market that was unwilling or downright unable to do so. Producers were largely facilitators, not drivers.

The company executives, agents and brokers I've spoken with over the years uniformly give the industry low marks for innovation, and I doubt that it's changed. Insurance "innovation" seems to come from God knows where, largely an ear-to-the-ground, nose-to-the-wind, fly-by-the-seat-of-your-pants process with product development plans all but written on the backs of envelopes. On the broad question of product innovation, leaders are almost apologetic about the industry's performance. Often, they use the word "innovation" in its narrowest sense, clearly referring to small product enhancements.

"Innovation in the insurance business tends to be very technical, boring, not very sexy," one underwriter told me. Another talked just as narrowly about packaging and delivery and improving a customer's "depth of knowledge." None spoke of periodic great leaps forward.

Another executive said, "The (industries) that are visibly innovative are industries where the leaps are larger. Ours are more incremental. I guess we're just driven by the legal nature of our business. We're a legal contract business. We're not a commodity. We're not anything other than language. We are selling a promise. It has to be incremental. The courts would demolish sudden shifts."

"You can't innovate freely," he said. "We innovate with a lawyer by our side."

Insurance innovation. Mutually exclusive terms? Let's hope we don't wind up a laugh in a Carlin routine.

TOM SLATTERY, a veteran editor and writer on industry affairs for 40 years, is currently managing director of Slattery-Esterkamp Communications of Baldwin, N.Y.

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September 15, 2007

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