|It's Politics As Usual|
|It's Politics As Usual|
When we started Treatment Magazine and began our planning over a year ago, one of the editorial themes that stood out as a natural for a publication focused on the business of addiction treatment was risk management, the century old practice of insurance agencies and carriers working with clients to lower the risk profile of their businesses. These practices almost always result in lower claims, which means higher profits for carriers. In the end, though, the savings in practice are usually mostly passed along to consumers because competition in insurance markets is typically quite fierce, with carriers cutting prices whenever they can in order to keep existing customers or bring new ones in the door.
In the personal lines side of the insurance business, coverages for the auto or home of individuals, for example, it is not uncommon for insurance companies to have captive sales forces, with Allstate and State Farm being prime examples of this model. But in the commercial lines side of the business, while it is not unheard of for carriers to employ captive sales forces, the vast majority rely on the many thousands of insurance brokerages scattered across the nation to bring in sales. Insurance brokerage is a business that is almost as fragmented as the addiction treatment business itself. Now, there is always a fair degree of politics involved in any sale, but the degree to which politics enters the commercial lines insurance trade is truly remarkable, with politics playing a crucial part in transactions probably more than in any other business.
Here's why: While there are thousands of brokerages, these brokerages are all selling literally the same product, which is insurance that is underwritten usually by the same several dozen carriers. In specialty markets like addiction, the pool gets even smaller.
So, because brokers are all selling the same product, sometimes at exactly the same price, what insurance brokerages are often in effect selling is a relationship. And, just like in love, these relationships are constantly being broken as the players routinely swap partners, giving rise to an often unfortunate brew of jealousy, hard feelings, back biting, gossip and, sometimes, lawsuits.
The story of the awarding of the Therapeutic Communities of America, TCA, insurance program - business that was ultimately won by Sterling & Sterling of New York - is indeed a vintage insurance brokerage tale. We began following the story about six months ago, and it has more curves and turns than an alpine road, with enough plot twists to satisfy even the most ardent Film Noir fan. Unfortunately, the juicy details were provided to us on a confidential basis, so we can't elaborate. But look for the novel, it's coming soon - maybe even a movie!
In fact, so supercharged is the political atmosphere surrounding the awarding of industry insurance contracts, that Naatp doesn't even go where TCA does, refusing to endorse any one broker with a captive program. Says President Ron Hunsicker: "We haven't ever been able to get the members to commit. Many have on their boards their local insurance brokers, so they are often reluctant to sever that connection." Of course, it's politics... as usual.
On the Cover: Jacob Levinson
Founder, CEO MAP