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Have we learned our lesson? Insurance carriers have, sort of (p. 5)

Tue May 8th, 2012 on     Insurance Claims,    

We are finishing up our discussion of what insurers and the cruise industry have learned since the Titanic went down 100 years ago. Both Titanic and the more recent Costa Concordia disaster are great illustrations of how companies set priorities. Most of this has been in the context of third-party insurance coverage, the kind of coverage companies buy to help pay for damages or injuries suffered by someone on their property.

Granted, marine insurance works a little differently, but the risk assessment is the same. And, like risk managers, jurors will look at the choices companies made in the ships’ design and, now, the cruise line’s corporate culture. For the Titanic, for example, the decision was between speed and safety or luxury and safety.

For the Costa Concordia and other modern cruise ships, the decisions could have been between technology and manpower; modern cruise ships have more systems run by technology than most of us can imagine, so the companies cut back on crew. Fewer crewmembers means compromised passenger safety in emergency situations.

We were talking last time about the Apollo One fire and the Senate hearings that followed. The investigation laid the blame at no one person’s feet. The problem was that many people did not recognize the risk. It was more than human error; it was a failure to anticipate human error. At the hearings, astronaut Frank Borman said the accident was caused by “a failure of imagination.”

In our May 3 post, we talked about a risk specialist at a major insurance company’s take on his job: His job is to consider the unthinkable. In some ways, that makes sense. When an insurance company gives a homeowner an estimate for property insurance, the dollar amount is the result of risk managers and underwriters putting their thinking caps on, comparing that house to similar homes, weighing the chances of a major storm and other types of perils — in essence, considering the likely, the possible and the unthinkable.

It may not always work that way. It may be that the insurance company has thought of all of the possibilities but not shared the information with the homeowner. That wouldn’t make sense, really, because the company wants to keep the premiums and not pay any benefits; it’s in the insurer’s interest to help a homeowner minimize his loss — and that can only happen if everyone recognizes the risks.

That can only happen if there is no failure of imagination.

Source: PropertyCasualty360.com, “Leveraging Hindsight into Foresight: Lessons from the Titanic,” Anya Khalamayzer, Laura Mazzuca Toops, April 11, 2012

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