Anonymous Disclosures May Defeat The Purpose

Once in awhile it can be refreshing to see a chief executive who wants to be open and honest with his industry colleagues and isn't afraid to tell you what hes really thinking.

Recently, a chief executive with a regional insurer spoke to a group of brokers in New York, offering some friendly advice on what they should be telling clients in the face of the contingency fee and bid-rigging scandal. It was refreshing to hear some frank talk about how brokers should respond.

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

Where the rules governing disclosure will eventually end up is too early to tell, he observed, because of the myriad of investigations yet to play out and the fate of new regulatory recommendations from the National Association of Insurance Commissioners still uncertain.

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

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

He warned brokers that they should look at the mutual fund industry as a barometer of the direction the investigations might go, especially if the Securities and Exchange Commission becomes involved. He noted that in the mutual fund scandal, regulators and investigators began looking at the big financial houses, only later turning their attention to smaller brokers. The same pattern, he cautioned, could emerge for insurance brokers.

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

Ouch!

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

Leave (and risk missing a good story).

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

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

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

There was some sound, interesting advice offered at this gathering that should be shared with the brokerage community. There was nothing untoward spoken, except for some of the language being more raw than one might be used to hearing under more controlled situations. And there was certainly nothing said that an attorney general might find objectionable.

Later, when the CEO was informed by the group sponsoring the meeting that there was a reporter present, he told them he did not want to deal with the press. This column is therefore taking the middle groundreporting what was said in what I was told would be an open forum, while respecting the speakers desire for anonymity.

Still, its unfortunate he wouldnt speak on the recordparticularly since disclosure was the subject. His was worthy advice, in terms that were easily comprehensible and refreshingly honest and open. The press has an obligation to share what it hears, but at the same time, it has an obligation to protect sources and not violate confidences. This is an attempt to accomplish both goals without cheating the source or the reader.

Covering this industry, a reporter gets the feeling at times that either insurance executives are afraid something they say will prompt an investigation, or they were burned one too many times by bad reporting. Maybe it falls back to an age-old concern in this industryhow to communicate with one another without violating anti-trust laws or disclosing proprietary information.

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

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

Mark E. Ruquet is NUs agent/broker editor. He may be reached at mruquet@nuco.com.

“Isn't this what the recent investigations are all aboutthe failure 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 serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Anonymous Disclosures May Defeat The Purpose

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