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Insurance Industry News from ProgramBusiness.comGreenberg: Big Brokers Losing Market Share
AIG chief sees big brokers losing market share
American International Group Chief Executive Maurice "Hank" Greenberg said that Eliot Spitzer's investigation of the insurance industry may mean leading brokers will lose market share to smaller, newer rivals.
During a speech at the 2004 Lehman Brothers Global Reinsurance Briefing, Greenberg said many insurance buyers are unhappy about the practices uncovered by Spitzer and added that brokers who survive will be "leaner and more responsive to the fiduciary relationship they have with their" clients.
"There's the old model and the new model: The old model firms are in bankruptcy or constantly working on how to cut expenses," Greenberg said. "The new model -- the Jet Blues of the world -- are leaner, working for less fees and commission and doing quite well."
Greenberg also suggested a practice known as "tying" may not survive. The practice occurs when a broker directs the business of its corporate clients to insurance companies in return for those insurers using it as a broker for their own reinsurance packages.
"Will a broker be able to own a reinsurance brokerage firm that is getting business from the same insurance company that it wrote a retail account with?" Greenberg said. "I don't know. There are a lot of changes under way."
Andy Barile, an insurance consultant with 40 years experience in the industry, said that Greenberg's comments suggest brokers may come under pressure to sell their reinsurance divisions.
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AIG (PA) Programs http://www.programbusiness.com/tracking/sftracker.asp?Sfid=226 and AIG Programs http://www.programbusiness.com/tracking/sftracker.asp?Sfid=184.
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