CEO PANEL DISCUSSES TOP INDUSTRY ISSUES
Natural disaster legislation, TRIA, insurance regulatory reform, agency incentive compensation are top items
WASHINGTON, D.C., May 2, 2006—Federal and state legislative and regulatory issues, market trends, technology initiatives and the state of the industry post-Katrina took center stage at a high-powered CEO panel held at the closing general session of the Big “I” National Legislative Conference & Convention.
Big “I” CEO Robert A. Rusbuldt moderated the discussion. Joining Rusbuldt on the panel were:
· Edward M. Liddy, Chairman and CEO, The Allstate Corporation
· Ramani Ayer, Chairman and CEO, The Hartford Financial Services Group, Inc.
· Paula Rosput Reynolds, President and CEO, Safeco Corporation
· Gary R. Gregg, President and CEO, Liberty Mutual Agency Markets
· Michael Browne, President and CEO, Harleysville Insurance
Panelists spent considerable time discussing the merits of a federal natural disaster backstop.
“Allstate supports state pools that aren’t taxpayer funded, but are put together by organizations whose welfare depends on good real estate markets,” said Liddy. “It wouldn’t be an industry bailout; it would be good for America, and good for Americans to know they are protected. Americans have an important emotional and physical connection to their houses and they need to know that they are protected.”
“As an industry we should think long and hard before inviting the federal government into our businesses,” said Gregg. “We’ve been able to deal with catastrophe as an industry for a long time. I’m very concerned about federalizing something that is regulated at the state level.”
The panel agreed that the catastrophe risk is not tapering anytime soon. “The baby boomers are about to retire. Seventy-eight million Americans will retire soon,” said Ayer. “Guess where they’re going? Not Chicago—but the coastal areas.”
Panelists also discussed contingent commissions.
“I believe strongly in the contingency process,” said Browne. “If independent agents continue to stay organized, articulate and keep pushing back, I think they can go a long way to continuing the system.”
“Even a straight policy is contingent,” said Gregg, expressing the frustration many in the independent agency system share with the terminology and portrayal of contingent commissions. “Getting paid is contingent on selling a policy—it’s all contingent.”
Discussing TRIA, CEOs generally agreed on the need for a federal backstop for terrorism.
“NCBR [nuclear, chemical, biological, or radiological related terror events] is not insurable at any level,” said Liddy. “It is war and needs to be picked up by the federal government.”
“No TRIA is counterproductive to the safety and security of this country,” agreed Ayer.
The leaders also took on the hot topic of state vs. federal regulation.
“The current system of state regulation is not effective,” said Browne. “But federal regulation brings the possibility of something worse: more bureaucracy, less flexibility, less understanding. We need to move very slow when it comes to federal regulation.”
Finally, the panel discussed the risks of writing in catastrophe prone areas.
“In the very near term, you have to pick your risks very carefully,” said Reynolds. “We’re trying to get a lot more selective at diversifying out of these areas. In an election year, you won’t see it. We’re on a several-year journey before companies like Safeco return to these areas.”
The CEO Panel is one of the highlights of the Big “I” National Legislative Conference & Convention. Other highlights included: appearances by Congressman Bobby Jindal (R-La.), House Majority Leader John Boehner (R-Ohio), Sen. Mark Pryor (D-Ark.), David I. Maurstad, insurance administrator and mitigation director of the National Flood Insurance Program, and House Financial Services Chairman Mike Oxley (R-Ohio).
Founded in 1896, the Big “I” 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.