The 'Terrible Trio'

MarketScout CEO Richard Kerr is a shameless tease! In commenting on his firm's “Market Barometer” survey, he asserted “there are still three large, admitted, publicly-traded insurers clamoring for premium, seemingly at any rate and continuing to prolong the soft market.”

However, he refuses to identify “the terrible trio” keeping prices soft despite the fact that “every sensible economic indicator tells us rates should be increasing…”

“Even the E&S market is refusing to chase rates down, sitting on the sideline as the terrible trio slashes each other to bits,” he said. “Our guess is prudent insurers are waiting to pick up the fallout when the terrible trio have their day of reckoning.”

He warned that “in our new financial world, the CEOs of the terrible trio are ultimately going to have some explaining to do,” adding that “…once these irresponsible underwriters are reined in, we should be on the way to rate increases. Until that occurs, the soft market will continue.”

Just who might “rein in” these price-cutting mavericks? Will peer pressure do the trick? I can't imagine an anonymous thrashing having any impact.

However, these are potentially dangerous words. While there might not be any legal liability, there are reputational risks, as once again the industry is perceived as a cartel prone to price-fixing.

I invited readers to speculate about who Mr. Kerr might be targeting, and a bunch of potential “suspects” were cited. But while a few ventured their guesses, more took the opportunity to lambast Mr. Kerr for interfering with the free market.

On my June 8 blog, J. Robert Hunter, insurance director for the Consumer Federation of America, asked: “Would the insurance executives be able to signal their desired market turn information so openly if not for the antitrust exemption they enjoy from the McCarran Ferguson Act?”

He complained that “every cycle–usually a year or two before the end of the soft market–we see the CEOs making the rounds at meetings their so-called 'competitors' attend, telling their rivals it is time to jack up reserves and hike prices and pointing fingers at those who resist.”

Mr. Hunter said “it is not unlike a bird's ritualistic dance of invitation to potential mates in the spring–in this case, a periodic invitation from some of the key birds in the industry for their compatriots to join them in welcoming the next non-competitive (i.e., highly-profitable) phase of the cycle.”

Another blog respondent, “Insured Consumer,” wrote to ask if Mr. Kerr is “publicly complaining that market competition is working? Is he saying that if only this 'terrible trio' would 'play ball,' then we could all raise our rates?”

Other readers complained NU shouldn't have published anything Mr. Kerr said unless he named the trio. Sorry, folks, but this is news, one way or the other.

One reader wondered whether we were protecting the carriers' identity because they are advertisers. They very well might be, but I swear Mr. Kerr has not whispered their names into our ears and made us take a blood oath to leave them unidentified. And I assure you we would never withhold a legitimate news story because it involves an advertiser. It's not how we do business.

We are just as curious as you as to who the three might be, but I have a feeling Mr. Kerr will never tell. In fact, with all the heat he's taking, he probably wishes he had never brought this up in the first place.