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CEO Panelists Hopeful on Terrorism Bill, Hard Market and Branding

Free-Ranging Discussion Offers Agents Insight From Industry’s Top Officials



NEW ORLEANS, Sept. 22—Ramani Ayer, CEO of The Hartford, believes there is a 50-50 chance that Congress will reach an agreement on terrorism insurance backstop legislation before it adjourns for the fall elections.

 

Ayer made the prediction during a CEO roundtable at the opening general session of the Independent Insurance Agents & Brokers (IIABA) New Orleans InfoXchange here today.

 

Ayer was one of five insurance company leaders who spoke before an audience of 1,200 with IIABA CEO Robert A. Rusbuldt serving as moderator. Other panelists included Ernie Lausier, president of Encompass Insurance; Greg Murphy, president of Selective Insurance; Mike McGavick, CEO of SAFECO, and Tom Van Berkel, CEO of MSA Group.

 

Ayer said that primary insurers cannot obtain reinsurance for nuclear, chemical or biological events. Without reinsurance, he explained, primary insurers cannot spread the financial risk and thus can only offer customers limited coverage. While tort reform legislation remains a sticking point, he said he is optimistic that the two parties will come together in the next few weeks to craft a compromise bill.

 

McGavick said he believes that efforts to obtain a federal terrorism insurance backstop will encourage Congress to create federal standards for state regulators. While that may not be all bad, he said he is concerned about the implementation period of such reforms and possible conflicts that could arise between state regulators and federal legislators. It is not likely, he explained, that an immediate balance between the two would be struck.

 

Besides terrorism, the CEOs acknowledged several problems with the current hard market that have driven up insurance prices and made some coverages difficult to obtain.

 

Lausier anticipates further rate adjustments for homeowners insurance. “We do need to take rates up,” he said. “Personal lines is a mature market without big growth opportunities.” Van Berkel said insurers need to better understand the problems in the homeowners market so they can price policies better.

 

“Higher retention is clearly a better loss ratio,” Murphy added.

 

McGavick expressed concern over pending asbestos litigation. “It paralyzes the entire insurance community when we have this cloud hanging over us. The industry could easily handle the problem,” he explained, “if it was as simple as paying the claims of those who actually show signs of real harm.” Ayer said that there is an inordinate amount of filings in some states or regions.

 

Van Berkel said market disruption presents an ideal opportunity for independent agents to prove their added value to customers in personal lines by helping them deal with the hard market and “to distinguish [themselves] with the consumer.”

 

“The only competitive advantage captive and direct writers have is a brand,” said McGavick.

 

“People do not know who independent agents are, but they do know value,” added Lausier.

 

Van Berkel said he would like to see the Trusted ChoiceSM brand become as common as Starbucks or Intel in 10 years. All of the panelists also are financial supporters of the Trusted ChoiceSM initiative.

 

As for the future of the industry Ayer said: “The strong [companies] are going to get stronger. The same goes for the agency side.”

 

The CEOs also shared perspectives on industry diversity and an influx of new talent. Lausier said younger talent is needed in the independent agency system. McGavick added: “The buying public is changing and if we don’t match that public we will fail together.”

 

IIABA’s New Orleans InfoXchange runs through Tuesday. The event features a parade of exciting opportunities designed to improve agency performance. From insightful workshops, to thought-provoking guest speakers, high-level networking opportunities and record-size exhibit hall, the New Orleans InfoXchange will arm agents and brokers with the tools to take their businesses to the next level.

 

Founded in 1896, IIABA is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life and health—as well as employee benefit plans and retirement products. Web address: www.independentagent.com .

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