Greenberg on the insurance industry
"It's the same as it has always been"
Hank Greenberg: "I'm not looking for revenge"
When you were starting out your career, did you envision insurance would be the industry you made your name in?
Not at all. It was purely an accident. I am a lawyer by education. I also came very close to staying in the military.
How did your military career shape your business approach?
It had a vey big influence. I was 17 when I went into service. I went all through Europe, and then I was recalled and was in Korea. I was a young captain. And I came very close to staying in.
Of course that had an influence on my life. I was very young. It gave me discipline, leadership and responsibility. That's very important.
The industry is often criticised for a lack of talent. How can it attract the best talent?
Having an environment that attracts people that want to work in the company, that will do anything to get a job in that organisation, that know they can advance based on their own abilities and that they are recognised for their own abilities – people who want to be in an organisation that is creative and has an environment of bringing change all the time. That's what brings companies to the top.
There are lots of insurance companies, but how many of them have those characteristics?
There is a lot of talk about cycle management. Has anything changed since the previous soft market?
It's the same as it has always been. Everybody blames somebody else for underpricing. That hasn't changed.
Do you see it being any better this time around?
The industry's balance sheets are in pretty good shape because you have got two years with no catastrophes, and there has been some improvement in the tort system so reserves are running reasonably well. That's giving them additional profits now. That will run out at the end of the year. You will see some bad results begin to emerge in 2009, and you will see some changes. That's how it always works.
How much has the tort system improved?
We worked hard at it. There are still too many tort trial lawyers, and I think we still have laws that make it possible for them to flourish.
There are a number of industries that are desperately in need of change. The medical malpractice industry, for example. Many doctors are leaving the practice. They can't afford good malpractice insurance. Is that good for the country? Of course not.
Class action suits are very costly. There have been some decisions recently that make class actions more difficult. We brought about a lot of change in Mississippi, there's a good governor that was elected there. There have been some changes in parts of Texas, not all. But then you have different states and counties within states that are problems. So there has been change, but there is more to go.
If there was one thing you could change about industry, what would it be?
If I could make a change right now I would say we should have an optional federal charter, as well as the option of having a state charter. The complexities in the US of doing business in all states is very costly, very time consuming, it adds to the unnecessary expense, you have different regulators with different views and it seems to me that you ought to have the option of having a federal charter.
I have been discussing it for years, but it is very political. I think that the states would fight very hard against it occurring. So I don't give it a likelihood of happening in the near future. It is going to take a crisis for it to come about. We generally respond to crisis in this industry, unfortunately.
Were you surprised to see the US Treasury recently throwing its support behind an optional federal charter?
I wasn't surprised, I was pleased. But it takes an act of Congress to get it done. So when you have Democratic Congress and a Republican administration, what's the likelihood of bringing about change?
I think it will happen one day. It is a ways away, but I don't give up hope.
Some insurers have called for a national catastrophe fund. What is your view?
I'm opposed to that. The insurance industry is in the risk business. That's the business. If you want to take away all the risk, then you can take away the insurance business.
Is there anything the industry cannot handle?
The industry cannot cover a nuclear terrorist attack. That's beyond the capacity of the industry. That's a government function.
What risks are on the horizon for insurers?
Some of the finical risks that have been reassessed. And global warming as an industry needs to be addressed.
What can the industry do?
The industry can play a role in that by being more vocal and pricing in accordance with exposures. And environmental is obviously tied to that to some extent, so there should be some activity by the industry there.
In the energy field, the industry could be pricing and underwriting in a way that pays a penalty for using energy that is a pollutant. All of that affects the healthcare industry as well. China is a good example of that. The environmental deregulation in China is going to lead to a generation of very ill people.