NAMIC Stresses Need For State Control

Insurance regulation is best handled at the more accessible local level, he said, rather than "through some disinterested parties in Washington," referring to proposals to have insurance regulated by the federal government through an optional federal charter.

Mr. Fisher, interviewed just prior to the NAMIC conference, has been president of Auto-Owners Insurance Group in Lansing, Mich., since 1993. He also serves as a director of the Mutual Reinsurance Bureau in Cherry Valley, Ill.

In his comments, he foresaw a slackening in efforts to demutualize companies and voiced support for credit scoring.

After state control, another major issue on the NAMIC agenda is reform of the class-action litigation system, he said. Not only is this a much-abused process, Mr. Fisher commented, but in addition, "the consumer ends up paying for that in increased premiums."

Mr. Fisher said the insurance industry must "better educate" and help the public understand that "pie-in-the-sky" class-action awards "end up costing us all money."

As for the controversy over insurers use of consumer credit records as an underwriting tool, Mr. Fisher said, "we know for a fact from our own company situation that the better the credit score, the better the loss ratio." As a result, he has "no doubt" about the credibility of credit scoring.

At the same time, Mr. Fisher said he recognizes that the implementation and use of credit scoring must be accomplished "with some care and empathy for people who may look at it from a different vantage point."

Under his leadership, the Indianapolis-based NAMIC also will continue efforts to promote the passage of federal backstop legislation for terrorism insurance coverage, Mr. Fisher said. "Many of our companies, due to their reinsurance restrictions, are concerned about what happens if we have another terrorist event," he noted.

Mr. Fisher reported that the mutual insurance industry is facing "extremely difficult" market conditions. He said there are many challenges stemming not only from the events of Sept. 11, 2001, but also from the storms that have occurred in the Midwestern states over the last four or five years, as well as from mold damage claims, among others.

Although there was a wave of mutual insurance companies–mostly on the life side–converting to publicly traded stock companies three or four years ago, Mr. Fisher predicted that demutualizations on the property-casualty side will become even rarer. He believes that the "mutual company industry" no longer views demutualization as "a preferred way of going." This is because of the many benefits to being a mutual insurance company, Mr. Fisher said.

For example, mutual insurance companies do not face pressure from stockholders and financial analysts to meet quarterly expectations. "As a mutual insurer, you can look at a far longer timeline to turn things around or to make decisions that impact your results without having the added pressures from the financial community," he noted.

For that same reason, Mr. Fisher believes that "the mutual insurance industry is in far better shape from a corporate governance standpoint than are publicly held companies."

Again, this is because mutual insurers "can take a longer-term approach" and do not have to be concerned about solving a particular problem "in the next 90 days or 180 days." As a result, mutual insurers also "have far less pressure to manipulate the numbers or to impress stockholders," he stated.

Finally, Mr. Fisher believes the mutual insurance community is more stable than "the overall market?where companies jump into a particular niche for a short period?to try to improve their results," and when that does not occur, "they jump back out of that particular market."

By contrast, mutual insurers "are more Main Street-type businesses within their communities," Mr. Fisher said. They "know the geographic area in which they operate," and feel much less pressure to jump in and out of markets, he observed.

"I think stability and mutual insurance?go hand in hand," Mr. Fisher said.