"Have you heard about the new ISO endorsement to the CGL? It might have a new sentence!"
Insurance is not as exciting as ... well, anything. But once in a while, we are graced with a bit of news that allows for a bit of gossip and guesswork that, if not exactly electrifying, at least makes things a bit more interesting. The announcement of the untimely departure of Brian Storms from Marsh is just such a bit of news.
Storms came into his leadership role at a time when our last exciting event, the Spitzer imbroglio, was waning. Marsh had some clear challenges in the wake of these events and Storms seemed like someone with the strong personality that could effect the necessary changes.
Recently, Storms shared his vision for the future with Risk and Insurance®. He outlined a way forward that included changing the focus of the brokerage more toward a value-added approach. He also sought to move Marsh away from insurance purchasing to more of a value consulting model.
Not huge change, but change nonetheless. Additionally, the personnel changes made under Storms' reign provided an endless source of water-cooler chat. Long-time Marsh employees were removed and replaced, in some instances, with professionals from the financial sector. This was a real departure from the incestuous hiring model we are accustomed to.
Marsh could be heading back to the old model. According to the word on the street, the short list of applicants hoping to fill the vacancy at the top of the Mash hierarchy includes a former Ace CEO, an AIG executive, an executive from Ace, a former Marsh CEO and two current Marsh executives. Of course, this list, being hearsay, could be entirely inaccurate.
I hope that it is. It would represent a return to the days that led up to the Spitzer probe. True, this is a small industry, but the tight relationship between Ace, AIG and Marsh is at least partially what led to the ordeal in the first place. Re-establishing this cross-pollination would be poor judgment.
What would be more disappointing is a signal that Marsh is retreating to the past. Not that it will return to contingent commissions and questionable bid practices. It is doubtful that those will be seen under any future leader of the brokerage behemoths. No, the danger is that things will simply return to the same old hidebound and reactionary refusal to change.
The reason that a bit of gossip is so welcome is that the insurance industry doesn't change.
Whether Mr. Storms could have changed anything will obviously remain unanswered. But at least while he was publicly discussing a more value-based brokerage model, including looking at risk management as a business advantage, there was hope for change. Now the only hope is that his replacement will be willing to change the game.
It is a real shame because the current system ignores the huge opportunities for risk management. The pool of available earnings in the broader risk management world is increasingly vast. They could increase their earnings by expanding their definition of risk, or they could continue to spend large sums fighting to steal market share from each other. Change in the broker model--now that would be exciting news.
is the risk management columnist for Risk & Insurance®. He manages risk for Sun Microsystems Inc.
December 1, 2007
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