It's about the policyholder! Risk managers must defend interests

Risk Management, Sept, 1997 by Paul S. Brown

As the debate over insurance company "restructurings" rages on, it seems like one issue is often overlooked -- the impact of such restructurings on the policyholder. During the brouhaha over the most recent, most publicized and certainly most debated restructuring plan, that of the CIGNA Companies, there was a tremendous amount of arguing over issues such as: Did the company act properly? Will the company survive? Did state regulators act properly? Was enough information provided? Were the calculations done correctly? One question that rarely, if ever, came up was: What about the policyholders -- how will they be affected by the restructuring?

At times it appeared that the insurer was not at all concerned with the answer to that question. It also seemed that the state insurance commissioner at the time was not nearly as concerned as she should have been. But even more disturbing was that the vast majority of policyholders, even the majority of CIGNA's policyholders, did not appear to be concerned with the answer to that question. Because of this collective apathy, CIGNA's restructuring plan sailed by the commissioner and was approved by the Pennsylvania Insurance Department. Thankfully, the Pennsylvania Commonwealth Court later vacated the insurance department's approval and CIGNA will now have to try again to complete its restructuring. The lesson from this incident should be that policyholders must look out for their own interests because no one else will!

RIMS members should have been up in arms about the CIGNA plan, but their was no outcry (the New York office received less than a dozen calls regarding the restructuring). A session on the subject at the RIMS Annual Conference & Exhibition in Atlanta drew less than two dozen attendees, some of whom were actually CIGNA representatives. This apparent lack of interest is disheartening.

The successful completion of this particular restructuring could have potentially changed forever the relationship between insurers and policyholders, and there was barely a peep out of the membership. When asked about insurer restructurings during a recent telephone poll RIMS conducted, few members were even aware of this issue. Among those who were, opinion was divided almost evenly among positive, negative and inconsequential. Again, policyholders must look out for their own interests because no one else will! It's about the policyholder, members!

If policyholders do not address this issue now they will likely face a future of restructurings and runoff operations. Indeed, this lack of policyholder opposition may actually encourage more restructurings. Then where will the industry be?

All is not lost, however. There is still time to influence the outcome of the CIGNA restructuring and to ensure that future insurer restructurings will be handled appropriately, with the interests of the policyholders paramount.

First, you can contact The Honorable Diane Koken, the new commissioner of insurance for the state of Pennsylvania (1326 Strawberry Square, Harrisburg, PA, 17120). Demand that she consider the impact of the restructuring on CIGNA's policyholders and that those policyholders be protected. Remind her, "It's about the policyholder, commissioner!"

Second, you can contact your state's insurance regulator and demand that the white paper being drafted by the National Association of Insurance Commissioners (NAIC), titled "Liability-Based Restructuring," state clearly and unequivocally that when an insurance regulator considers an insurer's proposed restructuring, the interests of the policyholders must be considered and protected above all others. As currently drafted, the white paper concludes with a list of 12 recommendations for regulators considering an insurance company restructuring, only three of which (numbers 4, 5 and 8, to be precise) even mention policyholders or the effect of the restructuring on their interests. Remind the members of the NAIC, "It's about the policyholder, commissioners!"

Third, you can tell CIGNA directly. If you are a CIGNA policyholder, demand that risks you have paid the company to accept not be transferred to some runoff operation. Remind the company, "It's about the policyholder, CIGNA!"

This happens to be one of the most anti-policyholder issues RIMS members have faced in a long time. But there are a lot of other issues that affect RIMS members and risk management directly. Be concerned with these issues and be willing to become involved. You owe it to your employer, the profession and yourself. Remember, you're the policyholders, folks!