BOSTON–The head of the Property Casualty Insurers Association ofAmerica warned lawmakers against overreacting to market disruptionswith government-run substitutes for disaster coverage that he saidwill do consumers more harm than good.

“The danger of overregulation is clear,” David A. Sampson, PCI'snew president and CEO, said here during his first public address atthe group's annual conference.

Mr. Sampson described the industry as one that is misunderstoodand seen by many consumers as the enemy.

“When markets hit bumps in the road–like those we areexperiencing in Florida and other catastrophe-prone states–it makesit easier for some public policymakers to say that government isbetter suited to making insurance products available and affordablethan private insurers,” he said.

Mr. Sampson, who joined PCI on Sept. 4 after serving as deputysecretary in the U.S. Commerce Department, warned that “the conceptof 'government to the rescue' can lead to unintended consequences,the most important of which is the undermining of the free marketsystem on which our nation's economy is built.”

He added that “we have a better chance of solving these problemswhen government unleashes the innovative powers of the free marketrather than unfairly restricting it.”

Mr. Sampson told PCI that before usurping the private sector,lawmakers should allow a number of “ideas to be debated, tested andallowed to work rather than resort to a 'government knows best'approach.”

Among the alternatives he suggested that in combination couldhelp solve capacity and pricing issues better than excluding theprivate market are:

o Catastrophe bonds.

o High-deductible homeowners policies combined with guaranteedlow-interest loans.

o Financial assistance to low-income insurance consumers.

o Financial incentives to build safer homes, as well as toretrofit existing homes to withstand the brunt of hurricanes andfirestorms.

o Changes in the tax code to allow insurers to build catastrophereserves on a tax-free basis.

o A well-structured public/private partnership between insurersand the state and federal governments to provide liquidity in theevent of a catastrophic loss.

He added that one of the keys to making sure lawmakers enactsound public policy is improving the reputation and credibility ofthe insurance industry.

“We are a foundation industry, since nothing moves in the U.S.economy without insurance,” he said. “But we are also amisunderstood industry, and that results, in large part, from thevery nature of our product, which is not tangible.”

In remarks in his prepared text that he was unable to deliver atPCI's opening session due to time constraints, but which PCI latercleared for publication, Mr. Sampson said too many consumers“perceive the industry to be their enemy–an unresponsive monolithof corporate greed that is more concerned about profits thanpeople.”

In his speech text, he said “this public perception issymptomatic of a growing wave of economic populism nationally andconsumer opinion about the industry in many parts of the country,especially in coastal areas prone to natural disasters.”

He cited the industry's poor image in “the aftermath ofHurricane Katrina” as one major cause undermining insurercredibility with both the public and policymakers.

“I am not na?ve enough to think the industry can wave a magicwand and convince the vast majority of the public to love us,” hewrote in his speech text. “But I do believe that by focusing on thefundamentals of our industry and through more effectivecommunications with consumers and public policymakers, we canrestore their trust in the industry and their respect for ourcontributions to personal safety and economic security.”

He conceded that “enhancing our public image and reputation willnot be easy, nor will it occur overnight. But it is possible, andwe must make this a priority for PCI and the industry.”