At the moment, several bills that would create a role for the federal government in insuring such natural disasters as hurricanes and earthquakes are moving though Congress. The bills typically envision the federal government functioning as a reinsurer, a concept that Soto said the association supports–with a few conditions.
"We have to not interfere with the private reinsurance marketplace," he said. "We have to have a high attachment point in order to achieve that." He added that if the government does get involved, it should sell reinsurance at actuarially sound rates. Otherwise, he said, people in areas not subject to hurricanes or earthquakes "will feel that you are subsidizing the coastal areas and (legislation) will have little chance of passing."
The Big "I" president also stressed the importance of mitigating wind and earthquake damage through the use of better building techniques. "Ultimately, we must reduce the exposure to loss if we are to bring down rates and … improve the marketplace in the areas affected," Soto said.
Soto, who is also the president of InSource, a Miami-based agency, has testified for the need to reform the National Flood Insurance Program before the National Conference of Insurance Legislators and other venues, where he has criticized the program for its inadequate scope; e.g., its lack of business income coverage for commercial insureds. At the convention, as he has elsewhere, he also stressed the need to get more people to buy flood insurance. One way to do so, he implied, would be to have homeowners policies cover the flood exposure.
Soto got some support for his objective, if not his specific means, from Roger Sevigny, New Hampshire's insurance commissioner. During a panel discussion at the convention, Sevigny noted the difficulties consumers face following a flood or hurricane, when they have to deal with different insurance companies for homeowners and flood insurance, as well as with state wind pools in some cases. "I'm a proponent of having a system that would take those coverages and put them in one place," he said.
While insurers settled the vast majority of claims for wind and flood damage that were filed in the wake of Hurricane Katrina, those that were disputed led Sen. Trent Lott (R-Miss.) and others in Congress to call for the repeal of the insurance industry's limited antitrust exemption under the McCarran-Ferguson Act. Attempting to punish insurers in that manner would be a mistake, Soto said. By denying small insurers access to industry-wide loss data, the repeal of McCarran-Ferguson would make it more difficult for them to compete with the direct writers that have drawn most of the wrath from Lott and others, he said. Repeal also could mean an end to the use of standardized insurance forms, Soto said, which would lead to confusion among insureds and greater E&O risk for agents and brokers.
In his comments, Soto also strongly criticized efforts of some state attorneys general to do away with contingent commissions, a form of compensation that he said aligns the interests of consumers, agents and insurers by leading to better risk selection and lower insurance costs. "The fact of the matter is that incentive compensation is proper, it is legal and it is used in every facet of commerce in the United States," he said.
Later, in the aforementioned panel discussion, Soto also answered those who think independent agents pursue contingent commissions at the expense of their clients' interests: "To think that … independent agent(s), for an additional possible half a point (of commission), or point, or even point and a half, (are) going to risk the … long-standing relationship that they have–in some cases generational–with their clients is to fundamentally misunderstand the relationship of the independent agents with their clients." That comment drew perhaps the largest round of applause of that session, maybe of the entire convention.
AA&B Down to Cases columnist Don Renau dies
Shortly before this issue of American Agent & Broker went to press, we learned of the death of Donald Irwin Renau, J.D., CPCU, who has been our Down to Cases columnist for almost 10 years. He died on April 14 at his home in Louisville, Ky. He is survived by Lynn, his wife of 45 years, two daughters and four grandchildren.
Don was a graduate of the University of Louisville Law School (class of 1967). He was an independent insurance agent in Louisville for 50 years, first with Avery Insurance Agency, which his grandfather founded, and then with Kieley Hines & Associates. A couple of years ago, on his 70th birthday, he retired from insurance to practice law full time, while continuing to write his column for us.
Don's first column appeared in our December 1997 issue. He offered to write the column after reading of the death of Richard J. Watson, J.D., CPCU, who had been our previous Down to Cases columnist. Judging from the feedback he received and often shared with me, Don's column was one of the most popular features in the magazine. Agents often used his cases in their own E&O prevention programs.
We still have a few of Don's cases on hand, which we will publish in upcoming issues. Meanwhile, we have begun a search for a replacement. Should any readers be interested in inquiring about the role, as Don once did, they can contact me at gwilliams@sbmediallc.com.

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