In a span of two days, I received three articles casting considerable doubt on insurance companies’ reputation and credibility. The first was a Newsweek article (2-25-25) citing a study done, but never made public, for the Florida Department of Insurance. The study showed how insurance companies were moving money from their Florida subsidiaries to parent companies rather than leaving money in these subsidiaries, adding to surplus and theoretically their stability. I did not r

The standard market insurance industry, due to its sloth, greed, incompetence, whatever other applicable descriptive, is a categorical failure in providing the value it was created to provide. That is not one opinion of a consumer advocate group. It is a fact reported by the industry itself. Here is the proof: According to the Aon/Ponemon Institute 2024 report, “Intangible Versus Tangible Risks Comparison Report”: The average Probable Maximum Loss (PML) of information (i.e.,

I read an article in Carrier Management in which the author advocated for a distribution model that “…emerges as the best of both worlds.” “In an industry facing high policyholder churn…” The article involved independent agents, and I know independent agents and their results extremely well. For decades, the normal client retention rate has been 90%, give or take two percentage points depending on the line of business and state. That number excludes non-standard auto, which

When I was a high school senior, I received an invitation to be listed in the Who’s Who of American High School Students. I was excited. My ego was growing exponentially by the minute. And then I read that to be listed, all I had to do was pay $29.99. I thought, “What a joke! My ego hasn’t inflated enough to pay so that my ego can be further inflated!” What's the goal here? Obviously, the publication’s goal is to make money off people who need some kind of stamp giving them l

In the summer of 2016, I gave a presentation to insurance distributor-related executives that was the epitome of the “Come to Jesus” moment. That presentation remains the hardest I’ve ever given because I knew the audience was going to viscerally react. I knew they were going to circle the wagons and completely reject reality. They were going to don denial as if they were putting on a helmet. I reviewed that presentation to learn if I went too far, didn’t go far enough, or wa

Several readers requested more articles related to insurance company financial terminology. I appreciate these requests because I would have thought it would be one of the most boring subjects possible for anyone other than insurance geeks. Words truly do matter. It’s funny, often ridiculous, and sometimes bordering unethical when I hear carrier employees, executives, and claims adjusters say things like, “Well, the contract does read that way, but that’s not what we mean so

The insurance industry’s law of large numbers is broken eight ways from Sunday. And it is broken due to a lack of critical thinking skills combined with minimal accountability. I’ll use Florida as a starting point. If the law of large numbers is applicable, then the way loss ratios should be reviewed is over a long period of time. This is an especially important statistical approach because, according to Wikipedia, about 121 hurricanes have hit Florida since 1851 (per the NOA

First rule: Hire the best attorney you can afford who has specific expertise fitting your exact need. Do not hire jack-of-all-trade attorneys unless you’re just checking boxes and do not care if they know what they’re doing. The very best attorneys may charge more per hour, but they generally work faster because they know what they’re doing. Besides, the full cost is not just the initial fee. If, for example, you hire an attorney to write a contract, but that contract is cont

First, when you see mutual companies reorganizing to gain better access to capital, this generally means they’re out of operational surplus. It might also mean executives have figured out this might be a way to make a lot of money. Based on the carriers reorganizing, my assessment is most just need an influx of capital because they’ve lost so much surplus. How did they lose so much surplus? Every carrier’s story is unique but quite a number incurred huge investment losses whe

Paying agents full commission who don’t offer quality guidance to consumers is too expensive. Many carriers are now paying agents more than 50% of all their expenses. There is nothing left to cut and yet, my very detailed research shows a high correlation between strong growth and low expenses. In other words, if you have nothing else left to cut internally and your expenses are still too high, agents’ commissions are all you have left if you want to succeed. And why might cu

Strategy and cultural changes are more urgent than ever. For the past four years, the P&C insurance industry has been in the hardest market in the last 50 years. Hard markets are 100% driven by a lack of surplus, not a profit issue. This is evidenced by how profitable carriers have been over the last four years. In 2023, they made record profits--but they didn't before record surplus. Strategy and cultural changes are more urgent than ever. For the past four years, the P&C in

I give up! I’ve been talking to walls long enough. I’m flipping my perspective from carriers’ financial strengths being important to not caring at all about carriers’ financial strengths. Why am I changing my perspective? Because most agents, like around 90%, don’t pay any attention to carriers’ financial strengths except to avoid the most toxic. If 90% believe a certain way, the 90% must be right, right? Instead, I will focus hard on suggesting agents have the most carriers

I consult with insurance agencies, brokers, carriers, and support systems of all sizes. My agency clients range in size between $100,000 in revenue to far over $100 million in revenue. I believe small agency owners have the hardest job because they must generate the revenue, service the revenue, manage IT, manage people, manage carrier relationships, and wash the dishes. Years ago when I began my career, life was less complex and being a small agency owner was easier. But now

In the fantastic book, The Secrets of Consulting by Gerald Weinberg, the author humorously describes common mistakes consultants make (and mistakes to which their clients should pay attention). One of his classic stories involves consultants and grocery stores. He calls it Rudy’s Rutabaga Rule. Seriously, you need to read any book that has a Rutabaga Rule! The story goes like this: A grocery chain asks a consultant to help them improve profitability. The consultant identifies

I received a request to write an article relative to critical insurance carrier financial ratios. The suggestion was to give explanations and definitions of various terms. My first reaction to this request was, I should have done that long ago! My second reaction was the impossibility of fulfilling the request. I have spent probably a solid 1,000 hours studying insurance company financial definitions. It really should have taken less than 40 hours. Maybe I’m slow but this ind

My research suggests insurance companies are in far more trouble than is being made public. Just think about these recent actions taken by insurance companies: A $10 million book with a 32% five-year loss ratio “must be moved”. A $7 million book with a 37% loss ratio that was so bad, so horribly bad (satire here), that the carrier could only afford to write it directly (although it did not appear like they wrote it directly because of the hidden ownership of the agency to who

Humans have always been attracted to fast money like moths to flames. Nothing is new in human behavior, at least in this regard. The difference today though is how technology can now measure how strongly attracted the moths are to the flames. An old-fashioned analysis of a gold rush is a good example of people chasing easy, fast money. This example is very relatable versus discussing financial engineering, huge debt loads that are not really debt but sort of is debt, derivati

It has now been 20 years since New York Attorney General Elliott Spitzer began investigating the insurance industry, and particularly one broker initially, for artificially inflating the price of insurance through “kickbacks”. He alleged the broker received these kickbacks through contingencies and also that the broker leveraged their threat to move carriers’ business if the carriers did not pay more. (Note: I am not sure these are the correct legal terms. These are my common

I was talking to my good friend Don Phin who has worked with, spoken to, and consulted with over 10,000 CEOs. He made a succinct statement that I’ve found to be true for people running insurance companies and especially people running insurance agencies/brokerages: CEOs are extremely motivated by revenue growth, sometimes to their peril. They tend to ignore other critical factors because their emotional brain simply does not connect. A singularly or even heavily focused, sale

A friend in a major city with no material extraordinary fire or flood catastrophe risk, PC 3, low crime, and upper middle-class neighborhood, advised his homeowners premium had tripled in the last five years. The carrier wants another 20% this year. He’s never had a homeowners claim. That kind of rate increase makes zero sense, unless the carrier itself has financial issues. Needing to increase rates 300+% in five years means the actuarial models used five years ago were fail