Producers Face Tough Battles In 2003

Many of the battles that agents and brokers fought in2002–license reciprocity, finding places to put business in a hardmarket, wrangling over privacy issues–will continue to rage in theyear ahead, producer association representatives warn.

At the top of the agenda will be reauthorization of the floodinsurance program, which the U.S. House of Representativesneglected to take care of in the closing days of the 107thCongress. Agent representatives have said they will quickly move topass legislation in the first days of the 108th Congress toreauthorize the program and restore coverage before a disasterbefalls their clients and the lack of coverage begins to affect theeconomy.

Once that is out of the way, some hot-button topics of interestto agents are tax reform and privacy. How far these issues get willdepend upon the interest of legislators at the time, and how muchthe White House is willing to push, agent lobbyists say. (Seerelated story, page 28.)

Meanwhile, brokers and agents will continue to be the bearers ofbad news as premium rates are expected to continue their upwardclimb, said Coletta I. Kemper, vice president of industry affairsfor the Council of Insurance Agents and Brokers, based inWashington, D.C.

Rates are not expected to increase as dramatically as they didin 2002, she said, but the challenge remains in not just providinga policy but spending the time with clients to find ways to reducetheir risk exposure and mitigating the premium cost.

Seeking alternatives to the traditional market is one answer,but that means a long-term commitment for the client. However,captives or other self-insurance options would be a solution thatwould at least “eliminate the dips and valleys” of the marketcycle, she noted.

“Brokers have worked some long, hard hours this year, and nextyear will probably not be as bad,” observed Ms. Kemper. “Thatsassuming there are no major catastrophes.”

Independent agents are scrambling to find homeowners coveragefor clients in Texas, Florida and other states where some insurershave stopped writing. And there does not appear to be reliefanytime soon in those problem markets, according to Robert A.Rusbuldt, chief executive officer of the Independent InsuranceAgents & Brokers of America, based in Alexandria, Va.

In an effort to improve their underwriting, some insurers willnot write homeowners policies unless they have the customers autopolicy as well, points out Gary W. Eberhart, executive vicepresident of the National Association of Professional InsuranceAgents in Alexandria, Va. Until business improves in terms ofinvestment returns and underwriting profits, agents will losemarkets, he said, and placement will continue to be a bigproblem.

“I dont know what the answer is,” Mr. Eberhart confessed.

What worries Joel Wood, CIABs senior vice president ofgovernment affairs, is that this hard market could result in a deeprift between the property-casualty industry and clients in asimilar way to what has happened with health insurers.

“What happened is the medical community and insurers becamebitter enemies,” observed Mr. Wood. “I worry some of the samethings could be in play in the p-c arena.” He added that “thechallenge for 2003 is to provide markets for members and theirclients and do it in an affordable and available manner.”

Litigation reform is acknowledged to be crucial to helping tomitigate the spiraling upward premium trend of the hard market.Without reform, jury awards will continue to spiral out of control,straining the bottom lines of insurance companies and limiting theavailability and affordability of markets, agent groups say.

With the Republicans controlling both houses of Congress, thereis a “solid shot” at asbestos litigation reform, said Mr. Woods.With a President who has a track record of producing class-actionand medical malpractice litigation reform in Texas, “we have a realopportunities there that probably didnt exist before the election,”he added.

IIABA's Mr. Rusbuldt stressed that “the whole issue of tortreform, whether it is medical malpractice, asbestos, orclass-action reform in general, is an all-important issue to agentsbecause it is affecting their markets. If you dont have a companywriting business in those lines [because of high jury awards andlitigation costs], obviously you have clients who are in realneed.”

All of those interviewed felt agent licensing on a nationalscale would continue to be an important issue, but differed on whatthe solution is and how far the debate would get in 2003.

Mr. Rusbuldt said that as long as there are major insurancemarkets such as California and New York not accepting licensingreciprocity, the system devised under Gramm-Leach-Bliley would notlive up to expectations.

PIA's Mr. Eberhart said he thought it was equally important thatwork be done to iron out the licensing issue, and have uniformityacross the board pushed by the National Association of InsuranceCommissioners. However, he added that he did not think licensingwould be high up on Congress agenda for 2003.

Mr. Wood noted that the industry is “a long way” from 100percent reciprocity. He said the goal of CIAB, which proposed anational licensing system as part of GLB, is for a dual state andfederal chartering system. But if that cannot be developed, then aNational Association of Registered Agents and Brokers should becreated to assure 50-state uniformity, he added.

Licensing is an issue of efficiency, stressed CIAB's Ms. Kemper,who said that as the insurance industry evolves in the globalmarket, it becomes increasingly necessary to be able to provideconsistent service across jurisdictional boundaries.

“The global insurance market has just taken off, and you reallycant operate in a 50-state system for the commercial side anylonger,” Ms. Kemper said. “You need a federal system, not only forlicensing, but also product approval because those sorts of issuesaffect our members' ability to get the business done.”

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, January 6, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.