An executive with the nation's largest property-casualty insurance trade group has called on insurers to fight to preserve their freedom to operate and to rein in "aggressive" regulators who, he said, stifle competition.
Roger H. Schmelzer, senior vice president of state and regulatory affairs with the National Association of Mutual Insurance Companies (NAMIC), made his comments Monday at the annual meeting of the Michigan Insurance Federation at Harbor Springs, Mich. His association reported his remarks.
The insurance industry successfully influences public policy, he said, "when we are assertive, thoughtful and focused in our arguments."
Mr. Schmelzer strongly encouraged insurers to embrace a proactive agenda to "fundamentally reshape the regulatory environment."
Insurers, he said, must "learn from past advocacy successes and put those lessons into practice in the face of an aggressive regulatory climate."
He called specifically for a spirited defense of underwriting prerogatives and a demand for greater regulator accountability.
"Regulation that curtails an insurer's ability to set prices–either through prior approval of insurance rates or restrictions on a company's ability to underwrite risk–stifles competition and deprives consumers of the benefits that naturally flow from competition," Mr. Schmelzer warned.
"Competitive risk-based pricing is fair, he said. "It produces prudent company conduct and widespread availability of coverage and risk-sharing among insurers. These are powerful social benefits for which any regulator should want to take credit."
The industry should also insist on a "value-added" state regulatory regime that routinely measures the regulatory burdens being imposed and is committed to reducing burdens that are no longer necessary, said Mr. Schmelzer.
He cited ongoing efforts to convince regulators that elements of the federal Sarbanes-Oxley disclosure law are not applicable to non-public insurance companies as an example of a proposal made without regard to cost or the practical burden to a company and its insureds.
NAMIC is currently fighting a proposal before the National Association of Insurance Commissioners (NAIC) to have portions of Sarbanes-Oxley reporting requirements for public companies apply to mutual insurers. NAMIC argues the requirements would be burdensome and overly costly for small operations.
Mr. Schmelzer said, "State regulators can do a better job for consumers if they take into account the cost and likely results of what they are proposing. They are accountable for the effectiveness of what they enact.
"They should also bear the burden of explaining why they need the regulations they propose, how they relate to the laws they already have, and how companies and consumers will be impacted by their proposals," he added.
Mr. Schmelzer also called for more states to follow the lead of Kansas, which enacted a self-evaluative privilege law this year.
The new Kansas law encourages companies to proactively identify and eliminate improper practices under regulatory oversight. "This legal privilege helps everyone. It is a mutually useful compliance tool that protects consumers by fixing problems early and eliminates the risk to companies of expensive litigation," he said.
According to NAMIC, its more than 1,400 member companies underwrite 43 percent, or $196 billion, of the property-casualty insurance premium in the
United States.
NAMIC reports its members account for 44 percent of the homeowners market, 38 percent of the automobile market, 39 percent of the workers' compensation market, and 31 percent of the commercial property and liability market.
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