|Sign of the Times|
Some passing comments on summer news items:
Institute for Financial Services: For the past few years Champlain College, in Burlington, Vermont, has sponsored the Vermont Securities Institute and the Vermont Insurance Institute. In keeping with the consolidation trend of the times, it has merged these two organizations into the Institute for Financial Services, recognizing that "the walls are crumbling between the insurance, securities, and banking industries." It's about time, since the Vermont state government has always recognized the inescapable linkage: its regulatory agency is the Department of Banking and Insurance!
Internet Risk Management Services: I received a letter from The Fidelity and Deposit Insurance Companies offering a new "risk management solution to protect financial institutions" from the risks of the information superhighway, stating that F&D "has become a much sought after expert in e-business risk." An expert? The letter lists neither an email address nor any web site for F&D!
He Protesteth Too Much: David Katz wrote a reasoned article in the June 7, 1999 issue of The National Underwriter entitled "Independent Agents Are Not Risk Managers." An agent replied in the July 5 issue, arguing that he indeed acted as a "risk manager," especially for his smaller clients (less than $100 million in sales and 250 employees).
He said his 24 years of "experience" as an insurance agent, plus his CPCU and ARM designations qualified him as a "risk manager." I have no doubt that some agents and brokers try honorably to present unbiased risk management counsel, but their experience and training in insurance probably limits their ability to see the broader requirements of the discipline. And their credibility will always be suspect, no matter how they try to separate themselves from commissions and insurance.
A "risk manager" must always be internal to any organization, no matter how small: in a small business the RM is the CEO. Outsiders, including agents, brokers, consultants, lawyers, engineers, can provide valuable counsel, but they can never play the role of risk manager.
". . . they think we do it very well:" The Economist of July 24, 1999, printed a two page ad from the Marsh & McLennan Companies trumpeting "People don't know what we do. But they think we do it very well." Oh? Apparently the public relations department of Marsh has never read the reports of the past two years from the Quality Insurance Congress rating the services of the major insurance brokerages, including Marsh Inc., as barely passing. The ad goes on to note that MMC has "delivered an average return on equity of 25% for the last five years." Are shareholders more important than customers at Marsh?