A few Claims readers and contributors I know subscribe to an insurance/risk management Internet chat-line called Riskmail. I was out of town during most of January but, when I got back, there were a bunch of entries discussing a nightclub fire in West Warwick, R.I. I had read about it in the pages of my favorite loss-related monthly magazine, Firehouse (Cygnus Business Media), back in April 2003. On Feb. 20 of that year, a fire started by pyrotechnics at The Station resulted in 99 deaths and 190 injuries. The fireworks ignited foam insulation intended to deaden noise. Noise was not all that it deadened.
One comment led to another and, soon, we all were submitting bids on what had been a comparable or worse restaurant or nightclub fire. Certainly the 1942 Cocoanut Grove fire in Boston (see Claims, March 2000) was high on that list with 491 dead. It was not alone, however. As reported in that article, a number of major fires had preceded it, including the 603 lives lost in 1903 in Chicago's Iroquois Theater, and the 146 female garment workers killed in New York's 1911 Triangle Shirtwaist Company fire. There also was the dance hall fire in Natchez in 1940 that killed 198 fun-seekers.
In spite of all that was learned in that 1942 Boston tragedy, an almost identical situation killed 165 patrons of the Beverly Hills Supper Club in Southgate, Ken., on May 28, 1977, and another 87 in the Happy Land Social Club fire in the Bronx on Mar. 25, 1990. Compared to the World Trade Center, these may be minor incidents, but they add up to a lot of suffering and a tremendous amount of liability.
The Riskmailers on the Internet (many of whom are in other countries) seem to eat, drink, and sleep various aspects of risk and insurance. That is their profession. For Ordinary Joe, however, the risk of loss is rarely considered. Unless the law mandated it, Joe would not buckle his seat belt, put on a helmet when he rides his hog, or check the batteries on his smoke detector. Like most of us, Joe will go for the juicy steak and forego the lean chicken or broiled fish. And let's have that with fries, eh?
One thing that the Sept. 11, 2001, World Trade Center disaster did was to make the United States more security conscious. If the big fear of the last half of the 1990s was Y2K, the big fear of the first five years of the new century has been security. We see it and hear of it constantly, and more than a few of us earn our livings at it.
The government will make us secure whether we like it or not, at least in theory. How secure our government is making us is not exactly clear, either to them or us. Red today, Orange tomorrow; will we ever see Green on the Homeland Security Department's color-coded terror alert status? The problem in the 21st century is the same as in every other century. We do not learn from our mistakes. We close barn doors long after the horse has escaped, but forget to check the door on the chicken coop until they all fly away. Will those chickens ever come home to roost?
Insurance and Security
One might reasonably think that the insurance industry is in the risk security business, in the sense that it not only pays for fortuitous losses that befall its policyholders, but also seeks, or ought to seek, prevention of such losses. Industry publicity might still lead one to believe that. Apparently, this is wrong. Although the insurance industry once might have been in the loss prevention business, now it is in the financial business. When the Atlanta Journal-Constitution did a series on what a rip-off credit insurance schemes were for the poor, it turned out that the insurers were in it primarily for the dough, not for the ultimate maximum benefit of the lenders, all with the blessing of the state's insurance commissioner, who also oversees Georgia's small loan industry.
According to the same newspaper, on Feb. 4 of this year, a coalition of insurance companies and safety groups have formed Advocates for Highway and Auto Safety, a group that is opposed to proposals of the Federal Motor Carrier Safety Administration to increase the number of hours that truckers can drive on the nation's highways. (I yammered about this last December, you may recall, so I will not repeat the pro and con arguments here.) Is there really an insurance coalition interested in safety and security? I have never heard of it.
Suffice it to say that, according to the National Highway Traffic Safety Administration, large trucks are involved in 2.3 fatal accidents for every 100 million miles those trucks drive, compared with only 1.9 for passenger cars. In 10 years, the number of fatal truck accidents rose more than 10 percent, from 4,035 in 1992 to 4,669 in 2003. Obviously, the government is not really in the security business either.
A few months ago, I began receiving copies of a publication called Security Director News, published by United Publications out of Yarmouth, Maine. It covers a variety of security issues, many of which I had never thought much about, even as a corporate risk manager. Sure, I had been concerned about employee safety, employee dishonesty, safe drivers, even executive kidnap and extortion, but things such as data security issues were the purview of the chief information officer.
Of course, that was in the days before risk managers, who were concerned with property protection and liability issues, got saddled with speculative risk matters and became CROs, chief risk officers. Today, these concerns are reserved for the Chief Security Officer, the CSO. Who are these guys? I suppose a few are former federal or local gumshoes, hired to screen employees, customers, vendors, and others who might cause mayhem.
In the February issue of SDN, editor Andrea Gural commented that spending in the security industry may exceed $7 billion by 2008, as "security is increasingly becoming an integral part of the business processes of a company." Some of the article headlines give hints as to what security in the 21st century means: "Tamper-proof shipping container tested," "Two Tennessee couples accused of counterfeiting bar codes," "Baby formula scam," "Farmers need to become part of the security infrastructure in the country's fight against agricultural terrorism," "Report: Boost security due to corpse scandal." (Corpse scandal? They were selling the cadavers at the University of California and are now going to implant bar codes to prevent resale of stolen body parts.) Hey, I'm not making this up. This is all stuff we never thought about 20 years ago, maybe even 10 years ago.
A few days later, we learned that the big data information collecting firm, Choicepoint, had been ripped off. The personal information — credit account data, Social Security numbers, bank information, who knows what else — of somewhere between 150,000 and 400,000 people had fallen into the hands of some Californian mobsters. What do we suppose that they are going to do with that information? Publish a book? Choicepoint is, according to its own PR, a leader in data information security. Just as secure as your own underwear.
PBS, HBO, and the BBC presented a made-for-television movie early this year, Dirty War, starring Alastair Galbraith and the City of London, along with the Metropolitan Police and Scotland Yard. Fundamentalist Muslims had smuggled radioactive material into England from Bulgaria and arranged to set off two dirty bombs. The spooks caught one in time, but the other exploded in the City of London business district, creating uncontrollable fires, hundreds of thousands of radiation victims, and financial mayhem, as the buildings could not be entered for 30 or more years.
Fiction, playing at warning. We saw it all with that 1970s movie, China Syndrome, that came true in Chernobyl. Could it happen? It is probably more a question of, "When will it happen?"
Is the insurance industry in the security business, or isn't it? I don't know, but I think that it ought to be. And just what is the security business if it is not about preventing loss? In the next few issues, we will explore this business and take a look at the sorts of situations that can turn sour in the world of being safe.
Ken Brownlee, CPCU, is a former adjuster and risk manager, based in Atlanta. He now authors and edits claim adjusting textbooks.
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