IIABA To Insurers: Get Your Cat Act Together

WASHINGTON--The president of the Independent Insurance Agents & Brokers of America said the association would not support a national catastrophe plan until the carriers come up with a unified position.

William G. Stiglitz III, president of the IIABA, made the pronouncement during a panel discussion with carrier executives today at the IIABA's National Legislative Conference & Convention here.

"If we are not united [in our message] than it is an exercise in futility," said Mr. Stiglitz.

He said the carriers' position on this issue is not unified, and until that happens the association is not going to offer support for any one plan.

"We would be glad to support a good unified position," said Mr. Stiglitz, noting that without such unity federal legislators will not listen to the industry. He also noted that given the industry's surplus and profit, it will be a hard sell to legislators if there is not one position to make the case with.

Cynthia Hardy Young, president of Encompass Insurance, the independent agent arm of Allstate Insurance Co., which has been promoting a call for a national catastrophe plan, agreed with Mr. Stiglitz.

The need for such a plan is underscored by the current capacity problems along the coast, she said.

Ms. Young, with executives from other companies on the panel, said that obtaining pricing adequacy in the face of big catastrophes is a challenge. With the population growth in the coastal regions, coupled with rising cost for homes and repairs, the industry will not be able to achieve the premium rate it feels it needs to cover the risks.

Ultimately, to achieve adequate rates there will need to be a combination of factors, besides a national catastrophe plan, she noted. Those elements include improved modeling, consumer education and updated building codes to require construction of homes better able to withstand a hurricane.

John Ammendola, senior vice president, Safeco Personal Insurance, and Robert V. James, senior managing director, president and chief executive officer, Countrywide Insurance Group, said their companies were pulling out of Florida because they could not achieve rate adequacy.

Mr. Ammendola appeared skeptical of a federal answer to the problem, but Mr. James wondered if all the federal dollars spent to give aid in the aftermath of the past hurricane season could be better spent in some other way. Neither explicitly said they did or did not support the plan.

In the aftermath of Hurricane Katrina, Mr. Stiglitz said that in an association survey agents said they were generally unhappy with the company response to claims, and were specifically critical of the use of independent adjusters. Some of the adjusters, the agents said, appeared to have little experience in the field, aggravating an already strained situation.

Tony Pavia, president, American International Group Auto, said his company recognizes the problem and is building a catastrophe response team of 100 that would be mobile and respond to events quickly.

Ms. Young said one lesson Encompass learned was to put company adjusters in the offices of independent agents. Doing so proved to be an effective and efficient way of processing claims.

Mr. James said the displacement of homeowners by 2005 hurricanes proved to be a major challenge. The company still has 80 claims outstanding because it has not heard from the policyholders.

"They are just now starting to come back," he noted.

"Using independent adjusters is not the way to go," said Mr. Ammendola, adding it is important that both the companies and customers be better prepared when the next catastrophe strikes.