Who Writes Your CEO’s Insurance?
Jay Fishman, chairman and CEO of Travelers, buys his homeowners insurance from a rival carrier! He said so during a speech in New York last week on catastrophe risk at NU’s annual Executive Conference for the Property-Casualty Industry. Am I the only one who thinks that’s a little weird?
As reported by our managing editor, Susanne Sclafane, Mr. Fishman revealed that he isn’t covered by his own company while relating a personal story about the high cost of insurance for homeowners in Florida–using the example of a house owned by his now deceased mother-in-law.
“It’s not written by Travelers,” he noted. “I don’t have insurance by Travelers from a conflict perspective. I just think that it’s not right for me to be insured by my own company.”
You could view this as a laudable ethical stand. This way there is no question of Mr. Fishman receiving an underpriced quote, overly generous coverage or extra special claims service just because he’s the big cheese.
On the other hand, buying your own products demonstrates faith in the company, doesn’t it? Does not buying your own coverage send the opposite message in any way, however subtle or even subliminal?
I’d love to know who Mr. Fishman buys his coverage from. What a marketing coup for his competitor!
I also have to wonder whether Mr. Fishman’s decision is unique, or standard practice among other company CEOs.
What do you folks make of Mr. Fishman’s position?
In any case, have a very Happy Thanksgiving! I know I have a lot to be thankful for–including the opportunity to voice my views on this blog, and to debate the issues of the day with you, my readers! Thanks again for your comments–positive and negative–and for making this blog the “public square” of the p-c industry, where everyone is free to speak their mind.
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I think he has it right.
I’ve known lots of people in the industry who didn’t buy from their own company. They want to avoid potential conflicts, and they also didn’t think they wanted someone in their company to have the underwriting application on them, or claim information.
Mr. Fishman may use “conflict of interest” as an excuse on why he doesn’t have Travelers insure his home, but I’m guessing that the real reason might be that his “high-valued home,” which I assume he has, is better protected by a carrier that specializes in it, like Chubb or Fireman’s Fund.
When I was in underwriting for a large P&C carrier, I underwrote the employee accounts, which consisted of nearly all the executives in the company, including the CEO.
Although, these folks never got a break on pricing other than not paying commissions (which all employees received), they got huge judgmental breaks when they or their family members got into trouble with driving records or claims activity.
Rather than asking these employees to find another company for their business, we (underwriting) just sucked it up and moved on.
And, in the personal homeowner’s line, it would be illegal to give an underpriced quote without undervaluing the replacement cost of the home, and that would leave the CEO potentially underinsured in case of a total loss.
To give any other premium break that the general public can’t also get would be a violation of most state regulations.
Happy Thanksgiving to you, too, Sam. I love your blog.
I applaud his position. I saw at once it was to avoid conflict of interest before I read the explanation.
How could he sign off on any reduction of rates or broadening of coverage that might benefit his own coverage–regardless of how minimally–without putting himself in a compromised position? It would be untenable.
I read no negative messages here about a lack of confidence in his own product–just good common sense. We could use more of it.
And thank you, Sam, for a great blog!
I have no idea if it’s ’standard practice,’ but it’s certainly not unique.
And I would hope most of us don’t view Mr. Fishman’s considering and acting on ethical questions–regardless of whether we agree with his conclusion–to be ‘weird’…not even a little.
Happy Thanksgiving.
Speaking from personal experience, I think it’s a horrible idea to be insured by your employer.
More than 99% of the time, there are minor advantages, including employee discounts and unofficial preferential treatment because “you’re one of us.”
However, imagine what happens if you have an unusual loss…the sort of loss where because of the size and/or nature of the claim, the carrier would be difficult for a normal insured.
What happens then?
I left my prior employer after my wife sustained severe injuries in a car accident. My then-employer insured both us and the driver who hit her, and the claim was very challenging….challenging enough that we had to retain a lawyer, and that the potential for a bad faith suit was very real.
Spending 9-to-10 hours a day working for the folks who are arguably trying to bankrupt you is a horrific experience, especially when your family asks, “can’t you do something” and the correct response is “if I did anything more, it would be unethical.”
While my family’s experience was extreme….well, I think an experience that was only a fraction as nightmarish as ours would make the case that doing significant experience with your employer can be a really bad idea.
At least one company prohibits its employees from being insured with them, to avoid conflicts.
I’m not insured with my company (I’m not the CEO), because of potential problems if a claim arose.
Just my luck, I got hit in our parking lot by one of our insureds and had problems with the claim.
It seems to me to be a commentary on our times when we see highly ethical behavior called into question.
Perhaps our elected officials on Capitol Hill could learn from the business leaders of our country. Then this type of behavior would be viewed as normal.
As an agent and prior claims adjuster for a national insurance company, I can tell you I find this is a common, normal practice.
There are more than one reason to not insure yourself with a company you own, manage or work for. Foremost is the ethical position.
Not any less important, though, is the privacy issue, as claims (especially an injury claim) would mean your personal business and (shudder at the thought) medical records are being reviewed and accessible to co-workers.
By the way, no matter what they say, I have never seen medical records in a PIP unit locked up. In many of my clients’ cases, it is also a matter of proper coverage.
CEOs tend to have large-value assets that are better insured by carriers who are designed for high-value clients rather than the rather mainstream, modest Travelers Platinum Plus policy.
If you ever need to sue your own company for some reason (uninsured motorist coverage comes to mind), it would be a sticky wicket for the CEO or an employee.
I started my career believing you should have your insurance with your own company, but I’ve changed my mind over the years.
Also, at least a few years ago, the employee account was not a profitable book for the company.
I agree with Mike the Actuary’s comments.
Some 20 years ago, an older insurance agent recommended that I think along the same lines: “You need to be able to sue the insurance company that insures your property, not beg them to take care of you.”
He also recommended that I not insure my close family or friends, for the same reason.
If something happens that would drive them to court to settle a claim, I would be required to be on the insurance company’s side in the argument.
However, if I refused to insure them, then I could make recommendations, review their case, and argue for them to help them, using the experience and knowledge I had attained in the business.
It makes sense and I chose not to insure my immediate family and I don’t insure my home or autos for that reason.