Insurance Transparency Project

Insureds,

We are brief today. No doubt all have probably heard something about the options-backdating scandal, in which corporate boards are accused of setting dates on options grants in the past, when the stock was low, so that the receiving executive was guaranteed to make money at the expense of other shareholders. This scandal already forced out William McGuire, the former chairman and CEO of the nation’s second-largest health insurer after Wellpoint Inc., which owns my carrier, Empire Blue Cross and Blue Shield.

Listen, I-Fans, this could have been any type of corporation — many are under scrutiny. A health insurer just happens to be at the center of this one, although that is troubling. To me, health-insurance executives occupy a special position of trust. McGuire’s 2005 compensation: $124 million. (ITP War Eagle shakes head sadly.)

I offer it, however, to point out the contrast between the capacious protections and glittering transparency offered to stock buyers compared to the nearly non-existent protections and unbelievable opacity confronting insurance buyers and policyholders.

I’m ambivalent about the SEC, but, having covered it, at least I know it’s a big brawny agency (especially post-Enron) with big-brainy people working there, at least until they move on to Skadden Arps to make $1 million/minute.
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But much more importantly, stock buyers and shareholders have access to a ridiculous amount of information, and more is always on the way, and you get find it by going to the clunky, hard-to-use — but invaluable — Edgar. If you are rich or work for a fancy national newspaper, you buy 10-K Wizard, which lets you search under a company’s ticker symbol (e.g. “ALL,” for Allstate) for a word or string of words (e.g. “investigation”). Unfortunately, this would not work for State Farm, which is not publicly traded.

Point is, though, you can learn more than you want to know about many important things. If you haven’t tried it, you should. The options-back-dating scandal was unearthed by business-school professors first at NYU, then at UCLA and Stanford and later Iowa.

Here’s a blurb from a Fortune story:

“The scandal has its roots in a 1992 SEC decree that companies list in their annual proxy statements the exact dates that they gave stock options to top executives.”

True, the data was found only in mail-in hard-copy filings that no one ever looked at, but that, I assume, has changed or will.

Now, contrast that with data about insurer performance. True, you can go to the site of the National Association of Insurance Commissioners, the regulators’ trade group (Huh?! What’s that mean?! See http:insurancetransparencyproject.com at this
link.) Records at the “NAIC Store” (ITP kids you not) are a mere $10 –each for “key” and “non-key” annual statement pages. Holy uncovered perils! Wow!

Actually, a much better deal is to go straight to the closely held A.M.Best & Co., which sells its own compilation of public records (for cryin’ out loud) for a minimum of
$695 a year for Best’s Aggregates & Averages (includes a subscription to Best’s Review magazine)

Sorry, I-Fans, but nothing gets ITP War Eagle’s feathers in a bunch, its talons squeezing its magnifying glass, like public records not available to the uh, public, unless the public’s name is “Greenberg” (1).

Private note to anyone working on, uh, federal insurance-reform legislation: It’s 2006. Put public records, collected at government expense, online and watch what happens.

Click here for short options story

(1) Insurance mogul M.R. “Hank” Greenberg, a billionaire many many times over.