I upset an insurance company executive some months ago by stating that insurance companies enjoy some luxuries in setting and releasing reserves both on a micro and a macro basis. He clearly believed, with all his heart, that carriers never transgressed the line of purposely manipulating reserves (the other option, at least for some, is complete ineptness, making the choice between being inept or manipulative -- which is preferable?). He was obviously an honest and ethical pe

"In our world, parallel lines do not meet and you can't turn an orange wrong side out." --Joseph Krutch Yet, I see carrier management and agency owners regularly default to wishful thinking in their decision making. In other words, while parallel lines do not meet, these specific people, believe the lines should meet. They make decisions on that assumption. Reality, though, does not change. Parallel lines can never meet no matter how much a person wishes the lines did meet.

​Given the voluminous agency consolidation (sales to larger distributors) and aggregation (combining volumes in networks or clustering), can carriers who historically focused on single agencies continue to do so? Can those carriers, almost exclusively regional or niched in nature, remain true to their core values and still survive? Given the same factors, what are state agent associations going to do? How many agents need to attend XYZ convention from the 25 remaining distrib

You walk into your office to read your email and find an overjoyous message stating that your very favorite carrier is excited to announce they have "joined" with a carrier you mostly abhor. The "merger" (your carrier was actually bought) is going to give them the capital and ability to do even more magnificent things for you, their awesome agent whom they really respect. The seller has been your mainstay carrier for twenty years. Their profit sharing is solid. You have perso

​I encourage agency personnel to read SwissRe's 4-2019 Sigma white paper regarding how analytics are being used and the ROI for carriers. It is the most solid report I have read and provides actual data rather than theory and wishful thinking. The results achieved with analytics will affect insurance distributors materially and the possession of this knowledge will give you advantages if you harness some creativity. I already have clients using this information to their benef

I study insurance carrier financials in detail all the time and have even built my own database. I consult with agents, brokers, networks, and carriers relative to their numbers and what those numbers mean to each party. Obviously, these numbers have different uses depending on whether the user is a carrier or a distributor, but what is awesome about math is that the resulting story is not subjective. A revenue figure of 100 and expenses of 110 year after year tell a clear st

Is your insurance company held hostage to distributors that cause problems or fail to perform but represent too much of your premiums? Do you have distributors that are “Too Big to Fail”? In other words, are you in a situation similar to a bank that has a large loan that has gone bad? The bank cannot afford to call in the loan and they can’t afford to ignore the loan. More and more distributors (I prefer “distributors” to “agents" or "brokers" because the word “distributors”

Over the last four weeks, I've had a series of interesting experiences involving larger and otherwise more sophisticated agency leaders failing. The common denominator was their Do-It-Yourself (DIY) approach. Failure is expensive in both money and time. These DIY leaders spent between $100,000 and $500,000, all in, for their failures and wasted a minimum of one year's hard work -- others' mistakes consumed more than a year. On the other hand, the clients I have assisted did n

Clusters/networks come in all shapes and sizes. There are those that are well considered and those that are pretty haphazard in design. Some are truly designed for a win/win between the individual member and the managers/owners of the cluster, while others are designed purposely for one side to gain the majority of benefits. Some are well built and solid throughout, and some have structures that are hollow behind their slick brochures and websites. There are ones that have di

I find the insurance industry's use of analytical data fascinating--and not always in a good way. Often the use and analysis is a complete clash with the absolute refusal to use math analytics. The preference is the use of emotional analytics. These two methods have been fighting it out forever. Usually math loses to emotion on the edges and occasionally at the center until something falls completely apart. For example, early in my career at an insurance company, a battle roy

P&C insurance companies are scared. Not all are scared, of course. Some are big enough, some are smart enough, and others are ignorant enough to not be scared about the future of insurance distribution. The ones that are scared are scared because of scale. So many agency acquisitions have been made by so few buyers that certain buyers are now larger than most carriers. For example, based on year-end 2017 10k's, Aon has almost $10 billion in revenue. Brown & Brown has $1.9 bil

Here is an interesting, maybe distressing, fact: Almost 100% of all health insurance carrier impairments between 2014 and 2016, inclusive, were the direct result of the ACA. Approximately 20 such carriers have become impaired according to A.M. Best. These insurance companies were created specifically as a result of the ACA, so their lives were short. Insurance companies that have such short lives are almost, in my experience, always seriously incompetently managed without an

Insurance is risk transfer. A consumer has a risk. They want to eliminate or minimize the financial impact if that risk is unfortunately realized. Therefore, they purchase an insurance policy. The insurance company takes the vast majority of the financial risk in return for a relatively small payment. The consumer eliminates the larger risk, however minimal the chances of realizing a loss, for a cost. For example, the consumer possesses the risk that his or her house will bur

Being the owner of an average independent insurance agency can be fun but maybe not as fun as it used to be. Agents are feeling considerable pressure to grow, to compete harder, to advertise more, to offer more services, and to invest more in their futures than ever. The days of building an annuity type business and then sitting back, taking company trips and making golf course sales are bygone. The demands for more, more, more of everything creates insecurity, anxiety, somet

"Do insurance rates really have an actuarial basis?" An insurance client might respond, "They damn well better have an actuarial basis!" A company person might think, "Of course they do. That is why we pay actuaries." And, depending on their point of view, an actuary might say, "Absolutely! Actuarially based rates are the solid foundation upon which the entire insurance industry is built!" or an actuary might say, "Nope. Not even close." On a very macro level, consider this: