The Invisible Bankers

by Andrew Tobias

Explains how insurance works, reveals little-known facts about the industry, and suggests ways it could be improved

Genres: Business, Finance, Economics

336 pages, Hardcover

First published January 1, 1982

Reviews

[Heather Terran · Rating 4 out of 5]

You wouldn't think that a book about the intricacies of the national insurance industry could be fascinating and entertaining. Indeed, part of Tobias's point is that that very dry-as-dust, completely staid and uninteresting facade is fostered quite deliberately to hide a great deal of financial hanky-panky that the industry execs don't want us to spend much time thinking about. But Tobias not only pulls aside the curtains, but manages to do it with a biting sarcasm that makes his dissection of the great machine an entertaining read.

The takeaway message is that the insurance industry is effectively a shadow banking system that handles a significant fraction of the GDP, yet has a great deal less regulation, less oversight, less accountability, less transparency, and far poorer rates of return (to the consumer -- not to the investors or execs) than the "visible" banking system. That's all certainly plausible, but some of his examples, while dated, are quite eye opening. (GM, when forced to choose between an auto production division and an insurance division, kept the latter and spun off the former. Hmmm.) As a bonus, he throws in a fascinating history of insurance, a useful taxonomy of insurances, and some practical, day-to-day advice (most people are far overinsured for the small fry that they could/should cover out of pocket -- e.g., appliance extended warranties -- while being far underinsured for devastating expenses (home, health, and so on).

The prime downside -- four stars, rather than five -- is that this book is now quite dated. Published in 1982, it paints a vivid picture of the dismal (from a consumer perspective) state of the regulation of the insurance industry in the late '70s and early '80s. But, of course, modern readers would like to know what's happened in the intervening three decades. (Given the massive move toward deregulation of the financial industries in general over that period, I somehow doubt that the situation has improved much.) I'd love to see an updated version of this work.

[R.W. Kennedy · Rating 4 out of 5]

As one who came into this book knowing very little about the nuances of life insurance, I have come away much the wiser. Tobias has a sharp mind and shows his wit in crafting examples of insurer's "bad faith" and the insured's "dishonesty." Some of the book's content is outdated, leaving one wondering exactly what has changed in the life insurance industry. For example, he mentions that computers are hardly in use in underwriting. I would be shocked if that were still true. In the end, I am much indebted to this book for teaching me all I ever wanted to know (and more) about life insurance.

[John · Rating 4 out of 5]

Rated: B+

[Harsh Thaker · Rating 3 out of 5]

Good write up on insurance sector based in USA. Bit dated but gives a wholistic view on how insurance sector works and earns right from insurance companies, underwriters, lawyers, policyholders, adjudicators and government.