So I’m going to be critical of Evan Greenberg today. Those who know me know I was an early backer of Evan’s back at Ace and have always been one of his biggest supporters.
I was at the head of the Evan bandwagon before there was a wagon. It was just me pulling a Radio Flyer.
That doesn’t mean he is beyond criticism though and everything that follows I would say to him directly and he would expect that from me, so anyone reading should take what follows in that spirit.
I think Evan screwed up recently by threatening “stakeholders” that work with litigation finance firms.
If you haven’t seen, Chubb has threatened any of its law firms, insurance brokers, investment managers, etc. who do business with litigation finance firms need to stop or lose their business with Chubb.
Look, I have rallied against litigation finance for many years and have warned repeatedly of the consequences for insurers. But turning to mafia tactics isn’t how you make the problem go away.
In fact, it actually makes it a lot worse in the long run.
If Chubb wants to dictate to its partners how they conduct their business, then they have to bow to the demands of those partners about how Chubb conducts its own business.
That means if one of their law firms is suing a company Chubb insures, Chubb should drop coverage, no matter how important the client. That’s only fair, after all.
Or if an asset manager has to sell their stake in Burford (the publicly traded litigation finance firm), then Chubb’s general account should have to sell a bond the asset manager finds reprehensible. This is a two way street, after all.
But, honestly, Chubb doing wrong by its business partners is only a small infraction. The bigger mistake is the message it sends to all the other outside interests who have targeted Chubb in recent years.
Chubb Caves To Bullies
Chubb, like many insurers, has been a target of special interest groups in recent years who think that, by pressuring insurers to stop providing cover to “offensive” industries, they can kneecap those businesses and accomplish their goals.
This is financial terrorism, plain and simple. Rather than win on the merits of their cause, they target weak spots, like insurance coverage, to go after businesses they deem undesirable.
Chubb had, for many years, rightly resisted this pressure, even as other weak-kneed peers caved.
However, in recent years, Chubb has folded like a cheap suit and dropped coverage for gun owners and several oil projects due to activist campaigns.
Insurers should not be making underwriting decisions based on political considerations. If the NRA program was profitable, Chubb should have continued to write it. If these oil projects were expected to be profitable treaties, Chubb should have written them.
What Chubb, or any other insurer, shouldn’t do is inject the personal politics of the CEO into underwriting decisions or let bad PR pressure an insurer to abandon its underwriting principles.
When insurers denied coverage to people due to redlining, they rightly were prohibited from doing so. Why are they allowed to “redline” oil companies???
I should note the protesters have every right to try to stop the project, but they should do so by convincing the oil companies to abandon it, not through taking advantage of spineless banks or insurers who want to avoid bad publicity.
Making Things Personal
Since I know most reading this haven’t been following this story for years, I think it is necessary to rehash some of the activist campaigns that targeted Chubb, including targeting Evan personally.
While I found these tactics loathsome and indicative that the activists couldn’t make their case persuasively on merit, they unfortunately proved that slinging mud was effective.
The main group that targeted insurers is called Insure Our Future. They are an environmentalist group that tries to scare insurers to drop clients they find objectionable.
As you can see on their site, many insurers caved to them with little resistance. Chubb was among the more stubborn, so Insure Our Future got personal.
They knew Evan would be at the US Open a few years ago, so they put a giant inflatable “Evan” outside the arena.
When that didn’t work, the next year they targeted Evan at his home.
It’s dirty, dirty pool, and the Evan I know would have doubled down and ignored their threats, but within 18 months, Chubb caved and changed their energy underwriting policy.
Adopting The Terrorist’s Tactics
Now, a year later, Chubb has adopted the tactics of the corporate terrorist to try to stop a business it deems undesirable. In doing so, they have ceded the moral high ground.
Companies with prestigious brands like Chubb are supposed to remain above the fray rather than jump in the mud because others are doing it.
What have we all been told by our mothers? “Would you jump off the Brooklyn Bridge because Johnny did?” Chubb was always the kid who didn’t jump off the bridge.
There is a compelling case to make about litigation finance being bad for society. Make that argument in the political arena and win through the regulatory channel.
The industry has achieved recent victories there, so it is bizarre to now resort to financial terror rather than keep playing out the legislative hand. It makes sympathetic ears reassess your motives…do you have a genuine cause or are you just the lesser evil?
Second Derivative Effects
By blessing these hardball tactics, Evan is implicitly encouraging other interest groups to continue targeting insurers to drop coverage of anything their special interest doesn’t like.
It’s awfully hard to protest that insurers can’t stop the next activist cause by dropping coverage when you have employed the same tactics against groups you don’t like!
I would have expected Evan to play enough moves ahead on the board to see this obvious consequence. Evan, winning this battle weakens your position in the larger war!
As I have asked in the past, where does one draw the line? Stop insuring cars and planes because they pollute? Drop all health insurers and banks? Stop insuring any business activity in China, Russia, Israel, or other contentious places? Stop insuring Tesla? Any business that has donated to Trump?
Where does it end, Evan?
Ensure Our Future
There are bigger principles to defend here. To ensure that insurance companies don’t get dragged into every future political fight that doesn’t involve them, insurers need to draw a firm line in the sand.
Namely, establish clear principles that underwriting decisions will be made on underwriting criteria only. If regulators determine that insurers shouldn’t be writing certain types of business or need to modify their rating variables in some cases, then insurers will obviously follow those rules.
To ensure that insurers don’t give activists the power of a new shadow regulator, they need to make clear that if activists want to change industry practice, they should target the state regulators, not individual insurers.
That way there is a common set of rules for all participants and insurers can lobby their side directly to their regulator rather than to an unreasonable activist who accepts nothing other than full surrender. It also redirects the PR attacks away from individual insurers.
It is also important to ensure that insurance clients view their insurers as neutral parties providing a necessary business function rather than as a stakeholder with a veto right over their businesses.
Clients already are wary of insurers and tend to view them adversarially. It will only further degrade trust if clients have to worry not just about denied claims, but also about insurer’s vetoing their business model.
Given there are other ways to deal with litigation finance, I don’t understand why Chubb decided to open Pandora’s Box rather than rightly stand on principle, as they historically have.
And as for the other major insurers who surrendered early without any resistance, at least Evan put up a fight. What’s your excuse for doing nothing? It’s time to develop a spine and stand up for yourself before it’s too late.