Anyone who expected fireworks yesterday had to be disappointed after J. Robert Hunter, insurance director of the Consumer Federation of America (better known as the man insurers love to hate) walked into the lion's den for a Town Hall meeting during the annual conference of the Independent Insurance Agents & Brokers of America in Washington. The debate was way too civilized, tame and even polite for a journalist's tastes, although Mr. Hunter managed to get in a few good shots. Actually, I had a lot more fun sparring with Mr. Hunter over lunch earlier in the day, where we met face to face for the first time.
You might disagree with Mr. Hunter, but I defy anyone to say he is ever dull. Indeed, one of the Town Hall panelists--Rep. Earl Pomeroy, D-N.D., a former president of the National Association of Insurance Commissioners--captured him perfectly by characterizing Bob as a "provocateur extraordinaire." ("That's his strength and contribution," said Rep. Pomeroy. "He raises important issues and tough questions and forces you to respond.")
I give Bob a lot of credit for agreeing to appear. This certainly wasn't a friendly or even open-minded crowd. Indeed, I have a feeling the audience was asked to hold its applause until all the panelists were introduced so that no one would have a chance to boo Mr. Hunter's entrance. Bob's never shied away from a fight, and he was a good sport to be the token consumer advocate in the room (although many independent agents would argue that they, too, are "consumer advocates" for their clients).
I also give kudos to the Big I for having the guts to invite the industry's "Public Enemy Number One" to sit in on their premiere conference event, when they know full well they will disagree with just about everything he says, and take a beating along the way. The audience, while no doubt hostile, was gracious as well in hearing Bob out, respectfully.
Over the course of the panel--which included the Big I president (Alex Soto), an insurance commissioner (Roger Sevigny of New Hampshire, vice president of the NAIC), an insurance company executive (Tom Van Berkel, chairman, president and CEO of The Main Street America Group) and Rep. Pomeroy--Mr. Hunter took the industry to task on a number of fronts. (I'm focusing on Bob here, but for full coverage of the Town Hall, check out Mark Ruquet's coverage by clicking here.)
On the post-Katrina debacle, he chastised carriers for "precipitously raising prices and abandoning markets," saying that insurers "should have stood by their policyholders when the going got tough."
He also called for the abolition of the "outrageous" anti-concurrent-causation clause in many homeowners policies, which allows carriers to reject a loss entirely if even some of it is caused by excluded flooding. "I can't believe insurers would sell me wind coverage with a trap door if flooding is involved even after the hurricane hits," he told me over lunch, calling the concept "at best, intellectually ambiguous."
On the efforts in Congress to strip insurers of their McCarran-Ferguson shield, he said during the town hall meeting that "no other industry with a straight face would argue that they need an antitrust exemption to remain competitive." (To which IIABA CEO and panel moderator Bob Rusbuldt brilliantly quipped: "Except Major League Baseball.")
Mr. Hunter said the idea that carriers--large or small--need the exemption to get access to data so they could accurately underwrite risks is "bunk." (Over lunch, he explained that he did not have a problem with carriers purchasing historical loss data. His beef is with the "manipulation" of data by vendors in terms of trending--which, he contends, creates "de facto collusion" on pricing. He doesn't claim there's a bunch of industry bigs meeting behind closed doors to set prices, but says the effect is the same when carriers base prices on predetermined data trends, rather than crunching the numbers themselves.)
During the Town Hall event, Mr. Hunter did not respond when the usual talking point was raised that the industry's return on equity is below that of the Fortune 500, so therefore carriers could not be accused of price-gouging or profiteering.
Over lunch, however, he asserted that the industry understates its ROE and compares apples to oranges by including mutual insurer results in its industrywide figures--which, he argues, invalidates any comparison with a group of stock companies outside the industry. Remove the mutuals, he contends, and the industry ROE would be higher. (He also argued over lunch that the industry's ROE should be lower than the Fortune 500's because insurers pose a "fairly significant below-average risk" for investors, as shown by the fact that the industry reported huge profits despite absorbing record catastrophe losses.)
Mr. Hunter told agents at the Town Hall meeting that "FEMA has totally screwed up" the National Flood Insurance Program. As someone who once headed the program himself years ago in its early days, he asserted that NFIP was meant as a stop-gap to give communities time to adjust building codes and land-use laws to lower the overall flood risk, "not subsidize people who build in flood-prone areas, and then expect all other taxpayers to bail them out when the inevitable hits."
On federal regulation, Mr. Hunter says he actually stands with the Big I against an optional federal charter, insisting that without a guarantee of adequate, vigorously enforced consumer protections, people are better off with "weak state regulation than ineffective national oversight."
On the Terrorism Risk Insurance Act's federal reinsurance backstop, Mr. Hunter said he stood on the steps of Capitol Hill after 9/11 to support TRIA's enactment, but now fervently believes such government protection is not necessary for "conventional" terrorism attacks--while conceding it might still be required for nuclear, chemical, biological and radiological events.
On contingency fees, even though independent agents contend that their profit-based bonuses should not be lumped with the volume-driven programs that prompted the big brokers to rig bids and steer accounts, Mr. Hunter said the same potential conflict of interest exists, but he stopped short of calling for a ban.
On a lighter note, over lunch, Mr. Hunter said that when he was named insurance commissioner of Texas, the industry "went nuts," but in his 15 months in office, he believes they found him to be a "fairly reasonable regulator." Without prompting, during the Town Hall meeting, Bob Rusbuldt confirmed that surprising point, stating: "I heard from Texas agents that he was a very good regulator." Who would have guessed? Perhaps if federal regulation is ever passed, he'll be named National Insurance Czar!
Some final thoughts.
During lunch, I was surprised by three points. For one, Bob's dad was a marine insurance adjuster, frequently dealing with the London market. He raised Bob on the belief that insurance was a business of utmost good faith, and he says he has devoted a large portion of his life to making sure the industry lives up to that ideal.
Second, Bob says he hasn't drawn any salary--only expenses--in his CFA insurance gadfly post, earning his living doing expert testimony and consulting work (such as his recent gig to determine "presumed factors" in Florida that insurers must use to lower rates to reflect lower reinsurance costs under the state's radical response to the contracting catastrophe market).
Third, luckily for insurers, Bob only spends two-thirds of his time on insurance issues. The other third of his life is dedicated to helping Africans cope with the many miseries afflicting that troubled continent. His next trip in June--his 31st in 35 years--will be to Uganda, where he will help set up safe houses to care for children (called "night commuters") who converge on four central areas to avoid being kidnapped by local military gangs (the boys for soldiers, the girls for wives). Noble work, indeed.
But for those who might be wondering when Bob might be stepping aside for good from his insurance crusading, don't hold your breath. "My work is fun, and I still enjoy it very much. I'm not going anywhere," he said.
(By the way, I know Bob is a fan of my blog and has quoted it twice in congressional testimony, so if he believes I have mischaracterized anything, I expect him to file a clarifying response!)
