Shortly after New York Gov. Eliot Spitzer resigned and left town with his tail between his legs, his successor began his term by revealing his own indiscretions. Meanwhile, as the executives at Gen RE and AIG await appeal on their fraud conviction charges, Hank Greenberg and the leadership at AIG are battling it out in the courts.
Does this drubbing in the court of public opinion affect the insurance industry’s livelihood?
For all the furor Spitzer stirred up during his tenure as New York attorney general, ironically, as quickly as his (and the newly named Gov. David Paterson’s) peccadilloes hit the front pages, it became yesterday’s news—replaced with other scintillating gossip, such as Britney Spears’ latest visit to rehab. And although a number of individuals who found themselves under Spitzer’s long arm may feel the sting for some time to come, Spitzer is, in the words of my 28-year old daughter, “so five minutes ago.”
I’ve used this column in the past to rally readers around taking the high road when it comes to ethics; calling on readers to bolster their corporate and industry-wide reputations. But the question remains: Does a tarnished reputation and an unending onslaught of scandal truly affect our overall industry’s financial stability or ability to grow?
It doesn’t. According to a property/casualty survey conducted by the New York-based Insurance Information Institute (III), combined ratios for 2008 are predicted to remain healthy (97.3), reflecting only a slight drop from 2007 (93.8).
The survey results indicate that the continuing respite in catastrophe losses in 2007, combined with strong performances in virtually all major lines of property/casualty insurance, will propel the industry to one of its best underwriting performances in the past 80 years.
The poll also shows that Wall Street analysts uniformly expect premium growth in 2007 to come in just slightly below expectations, while the outlook for 2008 remains only flat to slightly negative.
“This apparent paradox of strong profits but stagnant premium growth is a reminder of the highly cyclical nature of the property/casualty business, and the fact that the industry’s financial fortunes are determined by myriad factors,” notes Robert Hartwig, III’s president.
In other words, scandals may control the headlines, but not the bottom line.
The press will continue to publish updates on the “state of Spitzer,” along with associated public finger-pointing between defendants and complainants large and small. And as long as there are human beings who bring their human weaknesses with them to positions of authority and power, there will be scandals.
But in the shadows of industry ignominy, it’s business as usual for the vast majority of us not involved in behavior deemed illegal or corrupt. Let’s not give this matter any more power than the popular press thinks it already has.
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