Canadian Underwriter

Levene discourages “suicidal” return to competitive pricing

February 4, 2004   by Canadian Underwriter

Print this page Share

In a speech in London this week, Lloyd’s chair Lord Peter Levene spoke of the dangers of the “lemming culture” of insurance, with the prospect of a return to lax, soft underwriting.
He noted two U.S. surveys showing prices flattening, and even dropping off in some lines, during the last quarter of 2003. Levene says, “this is no time to return to past suicidal behavior and relax underwriting discipline.”
Levene notes that U.S. insurers, who have lost more than US$400 billion in the past two decades and produced an average ROE of 2.8% since 2000, can ill afford to slide back into old habits.
“While I believe there is a genuine desire to learn from our past mistakes, history proves that insurance executives and underwriters have short memories.” Insurers who trade in underwriting discipline for marketshare risk financial suicide, he says.
Levene also took the opportunity to again address “the greatest external threat” to the industry: rising tort costs in the U.S. He compared the cost of the tort system to a 5% payroll tax. “It’s a tax without representation at the most basic level, and it’s growing.” He adds that the problem is moving beyond the U.S. borders, noting, “there is strong evidence that the compensation culture is starting to plunder the U.K. economy.” He points to studies suggesting a 10 billion pounds annual price tag for tort in the U.K., growing 15% each year.
“We need to see politicians and influencers set aside their political agendas and recognize spiraling litigation impacts all political boundaries and crosses most industry sectors. It demands an appropriate and collective response.”
Levene also touched on the need for insurers to join together in promoting a more positive public image of the industry, as well as advancing common policy goals. Part of this, he says, is to invest in the social role of insurance and risk management. “Terrorism aside, we often fail to explore ways in which we can work together as an industry and with governments to improve economic conditions or reduce the individual’s reliance on the state. Furthermore, we have a great wealth of expertise on risk management and mitigation within the insurance industry, but we have not even begun to harness this expertise and deliver the real gains that we could by acting collectively.”

Print this page Share

Have your say:

Your email address will not be published. Required fields are marked *