The next big things: Entitlement culture, regulators on steroids

Among the many questions asked of senior executives at the RIMS Annual Conference was one asked many times over: What is the number one emerging risk?

After getting the through the besides-cyber-caveat, the executives provided some very interesting answers, specifically Steve McGill’s concern about the entitlement culture.

I immediately recognized the term. “Entitlement” has become a heck of a buzzword to describe those with a false sense of privilege–the idea one person thinks another owes him/her something for nothing. It was certainly used a bunch during the last presidential election. Here, however, I’ll stay out of politics.

McGill, group president of Aon and CEO of the Risk Solutions segment, told the audience that when he looks out on the worldwide liability insurance landscape he sees an entitlement culture affecting litigation.

“It is a really challenging environment,” McGill said in New Orleans last week. “With reserves running out, you can quite easily see an aggregation of risk [due to] the liability of entitlement.”

McGill predicted an increase in lawsuits, which–no matter your inclination to agree to disagree with his entitlement-culture theory–has been happening. Pat Gallagher, CEO of Arthur J. Gallagher, said defense costs as a percentage of total incurred losses has been staggering and he too predicted the tort system would expand.

The conversation got me thinking about just how much even cultural swings can affect claims, and I suppose I had not taken for granted that executives pay attention to this as much as actuarial science. This was a particularly interesting prognostication. Litigiousness undoubtedly is and has been a societal problem in the US but is this spreading worldwide?

Other sound bites

Gallagher was the first to answer the emerging-risk question and said regulatory concerns were at the top of his list.

Regulators are “easting steroids at a level they never have,” he said. The struggle for companies to comply with many regulations around the world can be a confusing and oftentimes conflicting hodgepodge.

“It’s a huge deal,” Gallagher said. “The cost of compliance is a huge deal.”

During another panel with insurance company executives, Zurich CEO Dan Riordan, pointing to the rapid growth on insurance in developing markets. But again, with opportunity comes challenges with different, often inconsistent regulatory frameworks.

“We and our clients see complexity,” Riordan said. This, he added, could “inhibit some of the opportunities for growth.”