The president of the Independent Insurance Agents & Brokersof America took the insurance industry to task for its failure todefend claims-handling practices and inability to deliver ontechnology promises at a recent conference.

IIABA President Alex Soto made his remarks during a paneldiscussion held in conjunction with the Young Agents and IIABAleadership as part of the Alexandria, Va.-based association'sannual Legislative Conference and Convention late last month.

Not addressing any one company, Mr. Soto instead faultedinsurance trade groups for their failure to deal with media reportsthat he said made it appear the industry failed to pay claims inthe aftermath of Hurricane Katrina.

He maintained that despite the fact the industry settled 98percent of claims, “hysterical media” reports made it appear thatno claims were paid.

Mr. Soto said the carrier associations should have been out witha stronger defense of the industry initially. Failure to do so hasresulted in the industry getting “hit over the head” repeatedlywith punitive legislation it does not deserve, he remarked.

Executives participating on the panel did not address thisissue, but did say there were lessons learned from the catastrophe,and agreed with Mr. Soto that agents need to be more involved inthe claims process.

James S. Hyatt, president of personal lines, The HanoverInsurance Group based in Worcester, Mass., and John H. Lynch, chiefexecutive officer for U.S. small business at Zurich North Americain Schaumburg, Ill., said agents should receive more draftauthority and that greater attention needs to be paid to improvingthe customer service centers to handle catastrophe claims.

Spencer Donkin, senior vice president of sales and agencydistribution for Seattle-based Safeco, noted that communicationafter a catastrophe is a key challenge and needs to beaddressed.

One major improvement that is needed is the standardization ofbuilding codes along the East and Gulf coasts, they said. Theexecutives pointed out that past hurricane events have shown thatthe better a home is built, the better is its ability to withstanda catastrophic storm.

“Some states have been progressive about it,” noted Robert P.Restrepo Jr., president, chairman and CEO of Columbus, Ohio-basedState Auto Insurance Companies. “But if companies can't spread therisk and can't write actuarially sound rates, and we don't seebuilding code improvements, then we will never resolve theproblem.”

On the issue of technology, Mr. Soto said that agents were“misinformed” by carriers about how long it would be before theywould achieve single-entry, multiple-company interface.

He observed that agents are still forced to deal with individualcarriers' proprietary underwriting systems. Until insurers devise asystem where agents do not have to make multiple entries, they willnot achieve true efficiency, he said.

Mr. Hyatt said he felt it was not too far into the future beforeagents will be able to simply enter a few pieces of data and beable to put information into a third-party database.

“We realize the inefficiency,” said Safeco's Mr. Donkin, alsoadding that the technology revolution is not that far away beforeagents will see the efficiency they desire.

While automobile has been easy to automate, noted Mr. Restrepo,other lines have been more difficult, and within 10 years systemswill be available for agents to fill out applications “with aminimal amount of information.”

In a separate speech, Mr. Soto touched on the association'scampaign to promote Real Time interface, a software programmingfeature that allows agencies to access carriers through theiragency management systems using a single log-on. They can thenperform all business made available to them by the carriers throughthe single log-on.

One focus of the panel discussion was on rural agents and howthey will survive. The executives said they supported cluster andaggregation programs that would help small agents continue to dobusiness and continue to write in those areas.

Mr. Soto pointed out that customers will continue to need“savvy” agents who can explain the “complex structure of what theinsurance contract is all about.”

Mr. Hyatt said that one advance for the independent agent systemis that they can now compete against the direct writers. But, asconsolidation continues, he said many rural agencies will findthemselves either part of a franchise or the arm of a strongeragency.

Touching on the current legislative climate, all the panelistsagreed that repeal of the McCarran-Ferguson Act, which grants theindustry limited antitrust exemptions and makes the regulation ofinsurance a state responsibility, would be a bad idea.

While it might affect data collection, which could put small andmedium-size companies at risk, the biggest issue would be the useof standardized forms. Each company would be forced to create itsown, which could put agents at risk for errors and omissions claimsbecause the forms have not been tested in court.

Both Mr. Donkin and Mr. Restrepo said they thought repeal wasremote, but Mr. Lynch said it was important to educate legislatorsabout the price that would be paid by the consuming public shouldthe act be repealed.