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Politicians should be much nicer to insurers

How dare politicians lecture our industry on what constitutes good conduct?

If we descend an inverted Jacob’s ladder down to the pits of hell, a few rungs from the bottom we will find today’s miserable crop of politicians.

Shunned and loathed, they look around for others to blame for their failings.

Casting their desperate gaze down a couple of steps, the politicos can hardly believe their luck for, clutching frantically at the rails, cling the charred and singed representatives of the financial services professions.

Here are the only people held in lower public esteem than the politicians themselves. The elected brethren can hardly believe their luck and immediately start hurling rocks down in their direction.

This is why New York Governor Andrew Cuomo’s broadside at insurers at the end of last week was no surprise to anyone who has been observing our deteriorating relationship with the executive branch of government in the past 10 years.

Who could forget Superstorm Sandy and President Obama’s instruction to insurers to “have a heart” in the wake of its devastation?

The scandalous insinuation was that we were an industry that didn’t have a heart – thanks Mr President!

State governors then jumped on the bandwagon, with warnings on how claims must be paid promptly. Not content with grandstanding, they actually made matters worse by imposing an onerous new bureaucracy on us in the form of punitive weekly report cards.

This only served to distract insurers’ resources from the task in hand precisely at the moment when they were at their busiest and really needed to be left alone to get on with serious work.

The hypocrisy was particularly poignant when the private market zoomed through its multibillion-dollar claims-paying in record time to leave only one massive laggard – the state backed National Flood Insurance Program – not only underwater financially, but swamped with a horrendous backlog.

So now to Cuomo – imploring insurers to act in utmost good faith in the wake of the coming into force of the Child Victims Act.

We do not need to be lectured in this way. Acting in utmost good faith was our idea and is something we have been doing unprompted for over 300 years.

In that time we have become used to the worst that can be thrown at us by well-meaning legislatures. This usually involves the re-writing of rules to re-open potential liabilities we have long-since closed. The motives behind the changes in legislation are always noble – pollution clean-up and the compensation of victims of asbestosis and now sexual abuse are massively important issues.

But that is why the tone of voice from politicians is so baffling. Surely, instead of screaming exhortations at us, they should be softly bringing us on side?

Periodic legislative backflips make it hard for us to plan financially and can, in extremis, cause bad outcomes for the most vulnerable if companies are wrong-footed and forced into run-off or liquidation.

For good reason we are regulated for our prudence as well as our conduct.

So when an elected official says that insurers should not demand verification of facts before paying claims unless there are good reasons to do so, they have crossed a simple line of common sense.

How could a prudent insurer not make checks before paying out precious capital reserved for legitimate and genuinely needy claimants? It has a solemn duty to do so.

In the end, insurance is part of the contract underpinning civil society.

Politicians should have a heart and stop behaving as if we are part of the problem.

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