Credit Crunch Makes Its Most Direct Hit on Insurance To Date
It is interesting and frankly scary to read about AIG's crisis. It will also be interesting to see how this crisis changes the way other insurers do business. As AIG's problems will be attributed to many causes, other insurers are likely to make many different corrections. To me, one correction seems most likely. As noted in this morning's Wall St. Journal (9/15/08 C1), AIG had pushed into "new businesses beyond the world of traditional insurance." AIG was involved in businesses ranging from plane leasing to skiing. Many other insurers have acted similarly, though perhaps not to the same extent as AIG. I expect insurers now to heed the advice from Jim Collins's book "Built to Last": they will "stick to their knitting"; focus their energies on what they know best. Insurers are likely to back off from fields distant from their core businesses. Though I disagree with many aspects of Mr. Collins's advice, this advice might well be prudent.
