Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets... But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions…?
--Alan Greenspan, December 5, 1996
Quick, somebody, send Alan Greenspan a note. His quote during the dot-com run-up was prescient (even if his policies were not!), but I think we’re getting the answer. Now, we know.
Irrational exuberance was replaced with aw-shucks humility when the dot-coms sold off all their foosball tables. But then the traditional companies stepped in with some magic of their own. CDOs and other financial sleights of hand worked for a fashion, but then, according to Berkshire Hathaway's Warren Buffett, they led us off a cliff. Now, we’re left with…irrational pessimism? Consumers and businesses are all sounding like Eeyore, the gloom and doom donkey.
So where to from here? I’ll leave the economic prognostication to someone else. But much of the current malaise seems to stem from consumer attitudes. So my prescription to start the healing process in the insurance industry is aimed directly at consumers, starting with readers of Celent’s insurance blog.
Here are three things I want you to do, starting today:
1)Buy some insurance that you intended to live without. You probably still have insurance on your car, your house, and your life, so those don’t count. But if you want to raise your coverages (especially against the backdrop of declining values!), that counts. Other good options: umbrella coverage on your home or auto policy, pet insurance, and long-term care insurance. Think of it as giving the industry its own stimulus check every time you pay the premium.
2)Call your agent and say encouraging things. Of course, buying something is about the nicest thing you could for your agent. But a little encouragement is always welcome. And we’re never going to pull out of this if we don’t have people selling our products.
3)Call the president of your carrier and demand better service. As the economy sags and people start looking for places to save, insurance is a tempting target. One reason is that people don’t get a warm, fuzzy feeling from their insurance experiences. Buying insurance, obtaining service, and making claims are all moments of truth where many insurers miss the mark. By putting pressure on service delivery, you will help your carrier retain current business and position itself to get more. Plus a side benefit: technology and service vendors in insurance will have healthier pipelines if the service imperative is emphasized.