Anonymous Disclosures May Defeat ThePurpose

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Once in awhile it can be refreshing to see a chief executive whowants to be open and honest with his industry colleagues and isn'tafraid to tell you what hes really thinking.

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Recently, a chief executive with a regional insurer spoke to agroup of brokers in New York, offering some friendly advice on whatthey should be telling clients in the face of the contingency feeand bid-rigging scandal. It was refreshing to hear some frank talkabout how brokers should respond.

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The CEO had one really good line that summed up the quandaryfacing many brokers: “You have to disclose your ass off,” he said.“Disclosure and good, commonsense behavior today is the best stepfor the long term.” He warned brokers to “think outside of the boxabout how you do your business” when it comes to disclosure.

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Where the rules governing disclosure will eventually end up istoo early to tell, he observed, because of the myriad ofinvestigations yet to play out and the fate of new regulatoryrecommendations from the National Association of InsuranceCommissioners still uncertain.

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For his part, this chief executive said he thought some form ofcontingency fee would remainpreferably one based on profit-sharing,which he said worked best for all concerned.

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The biggest loss the brokers suffered was the trust of theirclients, the CEO noted, predicting it would be some time beforecustomers would trust them as they had in the past.

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He warned brokers that they should look at the mutual fundindustry as a barometer of the direction the investigations mightgo, especially if the Securities and Exchange Commission becomesinvolved. He noted that in the mutual fund scandal, regulators andinvestigators began looking at the big financial houses, only laterturning their attention to smaller brokers. The same pattern, hecautioned, could emerge for insurance brokers.

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However, speaking of disclosure, there was, unfortunately, a bigproblemfrom a reporters standpointwith what this CEO had to saythat day. It began with his opening line: “It's nice to be able tocome to you and not have to worry about the press.”

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Ouch!

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Going into this confab, there was an understanding that therewould be no press restrictions, but the speaker obviously thoughtotherwise. There are a few options for a reporter trapped in asituation like this. The reporter can:

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Leave (and risk missing a good story).

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Consider everything said as “on background” (not attributed byname to the particular speakeras is the case here).

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Consider everything said as “off the record” (not reportinganything said at all).

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Report everything and let the chips fall where they may (whichcould burn a source and the group offering you access).

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There was some sound, interesting advice offered at thisgathering that should be shared with the brokerage community. Therewas nothing untoward spoken, except for some of the language beingmore raw than one might be used to hearing under more controlledsituations. And there was certainly nothing said that an attorneygeneral might find objectionable.

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Later, when the CEO was informed by the group sponsoring themeeting that there was a reporter present, he told them hedid not want to deal with the press. This column is thereforetaking the middle groundreporting what was said in what I was toldwould be an open forum, while respecting the speakers desire foranonymity.

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Still, its unfortunate he wouldnt speak on therecordparticularly since disclosure was the subject. His was worthyadvice, in terms that were easily comprehensible and refreshinglyhonest and open. The press has an obligation to share what ithears, but at the same time, it has an obligation to protectsources and not violate confidences. This is an attempt toaccomplish both goals without cheating the source or thereader.

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Covering this industry, a reporter gets the feeling at timesthat either insurance executives are afraid something they say willprompt an investigation, or they were burned one too many times bybad reporting. Maybe it falls back to an age-old concern in thisindustryhow to communicate with one another without violatinganti-trust laws or disclosing proprietary information.

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This CEO failed to appreciate one ironyadvocating transparency,as long as he can remain undisclosed. But isn't that what therecent investigations are all aboutthe failure to be open andhonest when conducting business?

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Some CEOs may breathe a sigh of relief when they believe thereis no press in the room to cover their remarks and make theircomments public, but in the end, has the industry benefited?

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Mark E. Ruquet is NUs agent/broker editor. He may bereached at [email protected].

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“Isn't this what the recent investigations are all aboutthefailure to be open and honest when conducting business?”


Reproduced from National Underwriter Edition, March 10, 2005.Copyright 2005 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.


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