Insurers who believe in American-style capitalism have to rally behind the free market to head off a government overreaction in regulating the economy in general, and property and casualty insurance in particular, warned Michael McGavick, chief executive officer of XL Capital.
"Give voice to the benefits of the free enterprise system that allows us to succeed, before it is too late," he said.
Mr. McGavick urged industry leaders to "stop hiding behind your trade associations" and step up to take part in the "profound debate" about the federal government's role in protecting against reckless economic activities, especially because p&c insurers did not engage in any such behavior.
"The simple truth is we're the ones who managed well through this crisis," he said. "Why not apply our lessons to banks?"
He told a meeting of executives here that industry representatives need to recommend their own corporate governance proposals, based in part on the successful p&c model, and should start with guarantees of real transparency and clarity.
Mr. McGavick's remarks came here at The National Underwriter Company's 21st Annual Executive Conference for the Property and Casualty Industry, sponsored by Ernst & Young and Genpact.
Mr. McGavick said the free enterprise system dominated in America until this global economic crisis hit. Now, he warned, there is "deep doubt" about whether the country's style of capitalism can endure.
Mr. McGavick cited five principles that he said CEOs should use to guide their companies in general, and through the economic crisis specifically:
o A narrow focus on an organization's strengths.
o Direct accountability and public action for mistakes made.
o Acting every day "like you only get one bite at the apple."
o Investing in the future.
o Communicating effectively.
Mr. McGavick said those lawmakers now proposing big-government solutions have been planning them for 29 years, and they are not wasting any time moving forward with their agenda now that the free enterprise system is in disarray.
The p&c insurance industry, by contrast, is pushing no plan and is lacking focus in the debate, Mr. McGavick charged.
On accountability, he said the government has effectively forced the free enterprise system to take "an enormous amount of medicine." The insurance industry in particular, he added, is being threatened by proposals in Washington, but is not acting like its future is at risk.
Instead, he said, the p&c industry is trying to act like this is not their fight because they did not cause the financial problems that crippled the economy.
But the industry should be getting out the truth that throughout the crisis, p&c carriers have performed well, with far less leverage and far more conservative investment portfolios than other financial services sectors.
He suggested that instead of finding a cure for what doesn't ail the p&c industry, the sector should be proposing solutions based on lessons learned from their own successful regulatory structure.
Discussing companies performing as though they have only one bite at the apple, Mr. McGavick said this is a chance for insurance executives to stand up for themselves, but instead too many are avoiding the spotlight.
He said p&c executives should be unafraid to defend the industry and make their case in Washington, instead of "just reacting" to efforts in Congress to include insurers in sweeping regulatory reform legislation now under debate.
He also strongly advised those who do testify on the industry's behalf in Washington to not be intimidated by those questioning them in Congress.
"When you play rope-a-dope with Congress and are a cowering witness, it invites a feeding frenzy," he warned. "Be properly humble, but make it clear you're not there to be a patsy. You've got a strong story to tell."
Overall, "we get an F" when it comes to communicating the industry's strength and financial soundness, he added.
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