The Insurance Crisis

Commonly cited causes of the crisis include the high number of lawyers in the United States, increasing litigiousness of society, juries which side with victims rather than uncaring big business, and the growing technological complexity of society (Huber 1987). Notably absent from such accounts are explanations relating to the management practices of insurers themselves. Why are there so many tort lawyers and lawsuits? Why are insurers perceived to be uncaring? Some of the top managers at Hanover Insurance, of Worcester, Massachusetts, were asking the same questions. These managers intuitively felt that their own management practices had contributed significantly to the problem. They distrusted easy explanations that fix the blame on outsiders. Blaming greedy lawyers, juries, and policyholders is psychologically safe, absolving insurers from responsibility. While not denying the role of these factors, they also saw that blaming the problem on external forces prevented the company from contributing to constructive solutions.