In Keystone: Keeping an eye on the insurance industry
September 6, 2010
KEYSTONE – Perched on his second-story deck at his Keystone “dream home,” Paul Siegert could be one of many retirees in Summit County kicking back after a lifetime of work. But even though he’s far from the bustle of corporate America – with the sound of the Snake River providing the backdrop as he works outside in his “summer office” – Siegert is driven to make a mark on what has arguably become one of the most controversial sectors of the economy: the insurance industry.
Heading up the Insurance Studies Institute – a national think-tank that publishes papers on the industry and which formed in 2007 – Siegert has found a niche for himself and a small staff that works from a virtual office. Now in his 50th year as a businessman, Siegert, 71, is enjoying what he says is a stimulating new phase of his career where he hopes to make a positive difference for consumers. Many sectors of the insurance industry, he says, are rife with abuse and practices that are anything but friendly to consumers, and by researching and publishing papers on these matters, Siegert hopes to shine a light on the more egregious abuses and help drive change within the industry.
Since it’s so large and diverse an industry, Siegert says ISI is initially focused primarily on what’s known as the life insurance secondary market. As Siegert explains, people with permanent or “whole” life insurance policies that carry cash value often find later in life that they no longer need the coverage. Most of the time, he says, people never recover that value because they simply don’t know it exists – or they’re confused by the process of going about getting it. Insurance companies, he adds, are not at all eager to make this any easier, but in recent years there’s been a growing market for these policies, and Siegert himself started a company that traded in this arena. As he explains, they’d buy the policies, continue paying the premiums and collect on them when the original policyholder died. Making this viable required a large pool of policies – or risk – since some policyholders would live longer than others. That meant a lot of money was needed to play in this market.
“The first try went belly-up, and I lost a few hundred thousand,” Siegert says. Taking what he learned from that failure, Siegert found partners to assemble a much larger pot of money – over $200 million – and they made a success of it. In working in this market, Siegert says he identified a lot of abuse in this area of the insurance industry, and it prompted him later to start ISI to address some of what he saw.
There’s little doubt much of the workings of the insurance industry are opaque and Byzantine to the average consumer, but when global insurance giant AIG all but collapsed in 2008 and required a huge government bailout, Americans got a glimpse into what the stakes are in allowing so large an industry to continue with little regulation.
“The question is how do we insure this kind of systemic failure doesn’t happen again,” Siegert says. “We have to have the resources in place to handle something like this rather than fall back on the social structure (bailouts). Government stepping in like this is not acceptable by the true definition of capitalism.”
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The Insurance Studies Institute, Siegert says, does not engage in lobbying for reform – they prefer to keep the focus on providing objective information for others who might be in position to effect change in the industry. Funded largely by foundations, the nonprofit offers all its published work for free.
“We work for consumers, to get them more knowledge, and want to see more regulations to protect consumers,” Siegert says.
Unlike a watchdog-style organization that might work with rhetoric and strong criticism of the industries it monitors, ISI works to provide facts based on evidence.
“We’re not looking to rip anyone apart,” Siegert says. At the same time, illuminating some of the more unsavory practices of the industry, he acknowledges, hasn’t exactly made ISI a darling of the big insurance companies. But Siegert says in just a few years of existence, ISI has managed to gain a following and influence some decisions – including some changes to tax laws regarding insurance. With a small staff and a modest board of directors, the institute also relies on a slate of contributors as well as partnerships with universities to complete its research projects. More and more, ISI is being invited to conferences, getting calls from the media and becoming a resource for those seeking information about how the insurance industry works.
Working from his home at Keystone, on the road in his mobile home or from various locations around the world, Siegert is eager to continue and expand ISI’s mission. But, he says, the organization is at a crossroads as its initial funding from the Sabes Family Foundation expires and ISI has to look for another $500,000 to keep going. For Siegert, though, the stakes are high enough to make the mission worthwhile.
“Like any industry, where there’s money, there’s fraud,” he says. “They do bad things, they take advantage. And they fight regulation wherever they can.”
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