Why is collecting on insurance so tough? Is insurance being sold in the right way? Some thought leaders are asking great questions about insurance. One of the leaders in that area is Jay Feinman, a distinguished law professor at Rutgers, and the author of a great book on the claim denial practices instituted by the industry to manage earnings and generate additional profits – the book is: Delay, Deny, Defend.
Jay and others are putting on another academic insurance conference next March 1, and recently issued a call for papers. The speakers include my former partner, Mike Childress, a man who both believes in insurance and founded a law firm that relentlessly attacks insurers when they refuse to honor their promises. Another speaker is Daniel Schwarz, a University of Minnesota law professor who has carefully studied several aspects of the insurance industry. The call for papers is set out below in full text because it says a lot that’s well worth considering. No doubt it will be a great conference:
"The Rutgers Center for Risk and Responsibility announces a conference on Fragmented Risk, to be held at Rutgers School of Law, Camden, on March 1, 2013. The conference will engage academics, industry professionals, lawyers, and regulators in discussion of issues that arise around the fragmenting of risk in insurance policies through exclusions, definitions, and other limitations, compared to the bundling of related risks. Academics and others are invited to submit proposals for presentations and other suggestions for participation. A description and Call for Proposals is set out below. Registration for the conference will open in January 2013.
Call for Proposals
A Conference on
Fragmented Risk
March 1, 2013
Insurance policies embody a tension between bundling risk and fragmenting risk. Often policies bundle related risks: A homeowners’ policy covers many risks of loss or liability related to owning a home, a CGL policy covers many of the business activities that may result in liability, and a health insurance policy contains broad coverage, especially following the Affordable Care Act. To the extent that there are limitations or exclusions, they generally involve large, relatively obvious categories of loss, such as expected or intended losses in the ordinary course of business.
Policyholders benefit from bundling risk because coverage is easier to purchase and more predictable, in that there are fewer gaps in coverage and those gaps that remain are more easily understood. Insurers benefit because they insure a large number of policyholders with similar risk profiles so they benefit from the law of large numbers.
Sometimes, perhaps increasingly, however, insurance policies fragment risk through exclusions, narrow definitions, and other limitations. Fragmenting allows insurers to exclude coverage for correlated risks where potential losses are high and to reduce premium costs to respond to market conditions. Fragmenting also reduces potential liability for new and unanticipated risks, especially due to technological change or expansive judicial interpretation of policy language; what began with questions about coverage for pollution and asbestos has now spread to mold, Chinese drywall, and even climate change.
Fragmented risk presents at least three types of problems. First, policyholders are likely to be less knowledgeable about coverage under fragmented risks, which reduces the efficiency of the market for insurance. Second, fragmenting produces gaps in coverage. Some policyholders can account for these gaps through riders or other coverage, conscious retention of risk, or other risk management techniques. Often, however, policyholders will not plan for the gaps, leaving the losses on them, on their victims in the case of liability policies, or on the public at large if government absorbs part of the loss, either through direct aid or through residual market schemes that are not actually sound. Third, fragmented policies may generate more disputes about coverage that must be resolved by regulators and courts, creating the potential for uncertainty among insurers and insureds."
The conference on Fragmented Risk will engage academics, industry professionals, lawyers, and regulators in discussion of these issues. A website will provide a forum for initial framing of issues and links to relevant materials prior to the conference and for follow-up after.
Confirmed speakers include Professor Michelle Boardman, George Mason University School of Law; Michael Childress, Childress Duffy; Professor Peter Kochenburger, University of Connecticut School of Law; Professor Daniel Schwarcz, University of Minnesota Law School; and Professor Jeffrey Stempel, UNLV Boyd School of Law
Academics and others are invited to submit proposals and other suggestions for participation. Send ideas and proposals by November 19, 2012, to Professor Jay Feinman, feinman@camden.rutgers.edu.
Registration for the conference will open in January 2013.