Tuesday, April 8, 2008

Auto Insurance Part 1

This is likely to be Part 1 of 1000 posts on this subject, but no time like the present to get it fired up.

When I say Auto Insurance, I am not talking about the Geico Gecko....I am talking about insurance for the automotive industry companies, such as yours truly (LM), and all the others, Ford, GM, Factory Five, etc.

(The Geico Gecko, Geico Insurance)

Today we got our first taste of the small mind of an underwriter and his limited imagination.

(Ned Ryerson, Groundhog Day, Columbia Pictures)

(excerpts, Groundhog Day, Columbia Pictures)

As we are getting rolling, we had asked to augment our insurance in a number of areas, and so we called a reputable broker to help us to get up the curve of solid quotes quickly.

A few quotes came back from a number of firms and many simply refused to write coverage.

Now, we have nothing to hide. You, our readers, have seen everything that we are about....

No ammunition factory.
No chemical lab.
No hazardous waste.
No heavy machinery.
Bright lights and safe workspace.
Lots of desk time (a very dangerous place to work, I might add).
....you get the picture

And yet, 95% of the people who even looked at writing insurance for us simply declined it.

I dug hard and the basic answers to our problems in even securing a quote for coverage have been an amalgam of the following: that we are small, that we are in the same industry as Ford, that we are engaged in "dreaded" R&D work, and that we have contractors working for us.

"Small", "R&D", "Contractors"!?!? I ask you does this not describe 99% of all startups?

Now, as for the Ford factor, when I coyly asked, "How many cars does Ford make? and how many do we make?" all I got was was a blank moment on the telephone.

And then one underwriter had the guts to admit that his company would not insure us because we are starting a business that "they had not seen or heard of before." He further said, "If you were to start a business for which we had underwritten thousands of similar policies before, then it would be ideal." I immediately shot back, "what kind of competitive advantage is it to start something that 1000 other people have already done".....again, the blank sound of wind whistling in one ear of the underwriter and out of the other should have tipped me off.

Honestly, these insurance folks are some of the most capricious and narrow minded crowd-followers I have ever met. They charge you for insurance and gladly underwrite it when you have no need for it (because you have no risk), but when you have risk, they offer no policy options.

I suppose the only redeeming thing to say is that my disgust for this anti-business behavior is surpassed by my disgust for the trial lawyers whose greed dictates the market clearing price for insurance.

We have a problem in this country. People sue each other more than they ought be allowed. Judgments are horrendously large. And insurance companies are running scared. All of this makes America a worse place to do business.

I am optimistic that we can overcome such challenges, but I would prefer to call them to account first.