Our “Stress Test” cover last issue drew quite a bit of attention, some favorable and some unfavorable. The e-mails and letters to the editor include the one which appears next to the content page…A producer made to disclose, at the point of purchase, that he or she has a specific type and amount of compensation is effectively being forced to make a statement in such a way that the truth may be used as a vehicle for falsehood. This is as old as logic itself. I recall my ninth grade “Jevon’s Logic,” a great book, which included instruction in the fallacies of emphasis and fallacies in reasoning. Among these was one fallacy of reasoning called “using truth as a vehicle for falsehood”. This fallacy occurs when, because of fits placement or emphasis, a statement, somewhat out of sequential context, implies much more then its simple truth states. The example often used is that of a captain and a first mate at sea for many days. It seems that the captain detested the first mate and every day wrote in the ship’s log “the first mate was drunk today” or “the first mate was tipsy today” or “the first mate had way too much to drink today.”
Up to twenty-one days at sea the captain continued his criticism of the first mate at the conclusion of each entry. According to regulation, a ship’s log must always contain the truth. Well, it seems that the Captain fell ill on the twenty-second day of the voyage and it fell to the first mate to do the log entry. The first mate of course, observing that the truth must be written in the log, gave his report, simply: “The Captain was sober today.” A producer made to disclose at the point of sale an extra added fact or a truth that would not necessarily occur in that context, stated in such a way that the inferences on the buyer’s behalf could be wrong or false, from an offer of a rebate, to the perception that the policy cost is flexible, and so on. There are probably better examples than this elementary one, but suffice it one, to say that this producer compensation disclosure at the point of sale will create false inferences, It invites bad behavior, in my view, while it will test, as our last issue demonstrated, much of the spine of the broker, his salesmanship, and the desirability of the entire commission system to the consumer. There is no doubt that a consumer faced with this information would wonder why he or she is being told at this point the amount and nature of the compensation. We believe the producer groups should get together formally and land on an agreement. It might be “strongly suggested” to the producer as a matter of good practice that he or she ask the client if that client wishes to know how a producer earns his money and upon what calculation. Most consumers, we believe, would respond “we know you get a commission and that’s just fine by us”… Let’s hope so… Rumbling over Reg. 68 continues. The Insurance Advocate has received information anonymously from individuals seeking to have this regulation drastically rewritten. You will be surprised when we do reveal the arguments made and, possibly, who these sources are…Sadly, we learned of the death of Eugene R. Fulton, Jr. of The Coughlin Group in Larchmont; Great family man and sportsman; Gene served the industry and his agency for a very long time with fidelity. RIP…It would not surprise me if David A. Sampson, President and Chief Executive Officer of Property Casualty Insurers Association of America (PCI), will draw a substantial crowd to the Insurance Federation of New York, Inc.’s Annual Luncheon on Wednesday, November 4, 2009 at Cipriani’s Wall Street location in New York City. As a leader of one of the most important insurance associations in the country, it will be interesting to hear his take on the last twelve months of insurance activities.
