Sampson Urges Industry To Stand Strong Against Moves To 'Micromanage' Insurers

The president of the Property Casualty Insurers Association of America warned his membership they must prepare for a long campaign to ward off attacks by lawmakers who want to “micromanage” insurers.

In addition to the revenue pressures brought on by the nation's financial crisis, insurers face a policy and advocacy environment that is “the most challenging since the second World War,” said David A. Sampson, PCI's chief executive.

Speaking here at the organization's annual meeting, Mr. Sampson said the financial services industry is stressed and under greater scrutiny than at any time.

“We're entering the blame phase…the show trial phase,” he said, noting that there have been 10 congressional hearings dealing with the country's financial situation.

Some analysts, he said, predict that upcoming actions by Congress to regulate the financial sector will make the legislative reforms of 1933 passed in the wake of the stock market crash, amidst the Great Depression, “pale by comparison.”

PCI and the broader insurance community, he said, must tell their side of the story to avoid negative consequences, and the industry needs to know what corrective action is contemplated “before it happens, so we can shape the debate.”

Mr. Sampson said PCI needs to plan its efforts like a good presidential campaign–with its formidable opponent seeking more economic regulation. All trade groups, he added, must be more cooperative in educating lawmakers in “the vital role [insurers] play.”

He said the focus must be on those who simply do not understand the industry, adding that the efforts of those who “want to micromanage” insurers must be countered.

The latter, he said, are ruthless opponents who will attack the industry's image and use “any means necessary” to undermine it.

Mr. Sampson said the industry needs to put across the message that it helps consumers rebuild after catastrophes and that it provides a half-million jobs.

He warned of a “long-term, grueling struggle” against interest groups long opposed to private markets, “who see a once-in-a-lifetime opportunity to advance their agenda.”

Meanwhile, the head of a major insurance brokerage in attendance said he doubts there will be much hardening of reinsurance prices in the immediate future.

Paul Karon, chairman of Benfield Inc., told National Underwriter he thought reinsurers were talking up hardening of the market but not living up to the verbiage.

“I don't think their hearts are in it,” he commented, adding he also thought reinsurers lacked “the intestinal fortitude” to risk losing business with rate increases.

Mr. Karon, whose brokerage was purchased by Aon, is due to become chairman of the merged firm's reinsurance operation–Aon Benfield Re–when regulatory approval finalizes the deal.

He predicted that in January the market would be flat, but in April, working on July 1 renewals, rates may rise 10 percent for property-catastrophe coverage.

The net reaction of customers to the Aon-Benfield merger, he said, has been positive, with concerns about the reduction in choice outweighed by an expected improvement in services. He added that he looks forward to working with an increased research and development budget, noting Aon's capital far exceeds that of Benfield.

The merger will result in workforce reductions to eliminate redundancies, he said, but he declined to specify when and who the cuts might affect. He added Aon has stated that in looking at personnel, the company will be a meritocracy.

In terms of business movement, Mr. Karon said this PCI meeting was different from past sessions because he saw a number of companies looking to take advantage of American International Group's difficulties and siphon away business from the firm, whose parent required a $123 billion federal lifeline to stay afloat.

“They [AIG] are under attack. I do not envy them,” he remarked.