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Social obligations

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Social obligations

As the season of giving and receiving begins, some observers are thinking about the insurance industry's special role in society and the obligations and opportunities that flow from it.

"It's an altruistic industry, by nature," said Mary Lanning, president of New York-based ML&G Associates Inc., her lobbying and consulting firm.

"It's built on a philosophy that all of us will have some crisis in life, but not all of us will have it at the same time," she said. So, we each contribute to the pot, it will be large enough to satisfy the needs of all individuals who experience losses, Ms. Lanning said.

"What insurance does is fundamental to support the fabric of our society and our lives," said John Queirolo, president and chief executive officer of Meriden, Conn.-based Webster Insurance Inc., a subsidiary of Webster Financial Corp. "We make people whole when bad things happen; we make businesses whole when bad things happen."

"I don't want to sound too heady about this...but you are a protector, a server and a helper in the community," Mr. Queirolo said.

The insurance industry is unusual in many ways, observers say, because of the obligations thrust upon it by public policymakers as well as those obligations that insurers and agent/brokers assume.

Concern about general social welfare led to the creation of guaranty funds and assigned risk pools, which are "unique" to the industry, said David Snyder, vp and assistant general counsel with the Washington-based American Insurance Assn.

In addition, regulators beginning in 1994 have required that some nonprofit Blue Cross & Blue Shield Assn. plans that convert to for-profit corporations establish foundations, or transfer assets to an existing one, "to continue meeting community health needs," according to a statement by Consumers Union, the advocacy unit of the nonprofit publisher of Consumer Reports. By 2005, there was more than $18 billion in over 170 such foundations, according to Consumers Union.

Such mandatory facilities demonstrate "a sense among humanity that we have to take care of each other," said Ms. Lanning, who is also a Roman Catholic nun living independently as a member of the service-oriented Sisters for Christian Community.

a fine line

There are limits, though, as to what private insurers--and their shareholders--can reasonably be asked to do, observers say. For example, regulators' previous efforts to urge some insurers to pay Holocaust-related claims on policies that were written decades ago by some affiliates approaches the "fine line between seeing the industry as a deep pocket to correct all ills vs. a more balanced role as (their) having a share in the public's well-being," said Ms. Lanning, who also heads YES!Solutions Inc., a New York-based nonprofit that provides a wide range of services and basic aid to the needy. She said its StreetCorner Gourmets annually provide a feast and fellowship to 4,500 on "the three lonely holidays"--Thanksgiving, Christmas and Valentine's Day.

Most of the insurance industry's charitable giving, though, has been done voluntarily.

"The culture is very community-oriented," said Terri Vaughan, a Drake University professor who previously served as Iowa insurance commissioner and president of the National Assn. of Insurance Commissioners. "I do find that there are people in the industry who view their jobs as more than just a paycheck. They are on a mission and they feel they are doing good."

Leading a long list of contributors is Warren Buffett's recent $31 billion gift to the Bill and Melinda Gates Foundation, a record-setting donation from the head of Berkshire Hathaway Inc. in Omaha, Neb.

The insurance industry's donations to U.S. charities totaled $152 million in 2004, placing it among the top 10 industry contributors in terms of overall giving, according to the latest figures from The Conference Board.

In Ms. Lanning's opinion, such figures "grossly understate" the money that industry participants give for charitable purposes both professionally and personally because most businesses strictly adhere to Internal Revenue Service guidelines about tax deductible contributions and often do not include some marketing expenditures that are essentially charitable contributions.

The industry's generosity has amazed Joel Wood, Washington-based senior vp-government affairs for the Council of Insurance Agents & Brokers. He and his wife established a foundation to eliminate a deadly form of muscular dystrophy that attacked their 9-year-old son. "I've been astonished by the hundreds of thousands of dollars of support I've received from those in the insurance industry, including some with whom we bump heads."

The Foundation to Eradicate Duchenne typically receives about $1 million annually, more than half of which came this year from a dining-out fund-raiser, Mr. Wood said.

In addition, Mr. Wood said he and fellow lobbyists have helped encourage Congress to earmark at least $30 million in federal funds to aid research into the disease.

Separate Foundations

Many large insurers make their charitable contributions through separate foundations--typically organized under the IRS' guidelines as 501(c)(3) nonprofits--or contribute to the Insurance Industry Charitable Foundation Inc. The Walnut Creek, Calif., foundation, which was established in 1994, provides $2 million in annual grants to nonprofits dealing with four main topics: child abuse prevention, disaster preparedness, education and literacy, and health and human services. It also encourages volunteer services as well as industry participation in community fund-raising efforts, said Bill Rice, the foundation's CEO.

The foundation's focus had been primarily in California until this fall, when Mr. Rice announced that a New York division, which will serve the city and tri-state area, will become operational in January 2007. In addition, talks are under way to expand foundation operations into Chicago, and perhaps into Atlanta at a later date, he said.

"I'm very, very impressed by the dedication of companies and their individual employees," Mr. Rice said. For example, "it's very compelling" that the insurance industry contributed many millions of dollars to Hurricane Katrina relief, he said.

Is it enough?

"The many challenges facing our communities are greater than any single organization's ability to surmount them," said Loretta Worters, a vp with the New York-based Insurance Information Institute, in an e-mail.

"Giving our time, talent and financial support to respond to the economic and social needs of our communities goes beyond seeking returns in terms of public relations or marketing," Ms. Worters said. "It's a natural extension of our business."

"Each company is different when it comes to being active in their respective communities," said David Reddick, associate director of public policy with the Indianapolis-based National Assn. of Mutual Insurance Cos., in an e-mail. "Some companies stress a great deal of involvement in community organizations like the United Way, while others actually encourage their employees to be involved in organizations like Habitat for Humanity and give the employees paid time off to work on these projects," he said.

Other companies, Mr. Reddick noted, match employees' contributions to charitable organizations.

"The opportunities are immense," said Mr. Queirolo, whose 209-member insurance agency publishes an annual report about its charitable activities that have ranged from helping with Special Olympics programs to "buying" the right to wear jeans to work by contributing to a charity.

Mr. Queirolo created one opportunity recently when he challenged employees, about half of whom traditionally participated in the local United Way fund-raising campaign, to increase their participation by 10%. the 60% participation level was met, he promised to personally cook dinner for everyone.

His employees met the challenge.

Mr. Queirolo is now rounding up crock pots so he can keep his pledge by treating everyone to what he describes as his famous chili, with a milder batch for the gastronomically risk averse.