P&C Insurers Could Be Hit By Populism Backlash, Says PCI CEO

"The first order of business will be attacks on health insurers," following the inability thus far of Democrats in Congress to get a health care reform bill to President Barack Obama's desk, he said. "But it's a very short leap to the rest of our industry. Our research has confirmed that most people don't make a distinction among the various sectors of the insurance industry."

At first, he said, "we were concerned about being swept into the financial services regulatory overhaul legislation still being shaped in Congress. Thus far, we've been well-positioned to stave off any collateral damage to the p&c industry, but the process is far from over, especially now that it is becoming the only priority legislative item still on the table."

Public anger at the financial sector could result in a broader attack against the insurance industry, according to Sampson, noting that nothing was off limits, including auto and homeowners insurance pricing, the use of credit scoring in underwriting, tort reforms, federal antitrust protection under the McCarran-Ferguson Act, as well as flood insurance.

"Short-term extension of the National Flood Insurance Program is not ideal, but we could be extremely vulnerable if they ever do open this up for debate," he said. "The fundamental structure of the NFIP could change if calls for reform are taken to their extreme." Some would like to expand the flood program to cover wind risks, for example.

Sampson said that political populism is being driven by economic uncertainty and political instability.

He cited various polls showing that the majority feel the country is on the wrong track, that Congress is doing a poor job coping with the country's economic woes, and that President Obama's approval ratings have fallen below 50 percent.

The tangible result of growing public dissatisfaction was the election last week of a Republican dark horse, Scott Brown, to the U.S. Senate, giving the Republicans a crucial 41st vote to block Democratic legislative initiatives such as health care reform and tax hikes, according to Mr. Sampson.

He said Brown's election was "nothing less than a tectonic shift in the political ground beneath our feet, and we'll be feeling the aftershocks for quite some time"–certainly into the crucial midterm elections this November.

At the start of his speech, Sampson noted that he had predicted last year at this time that "voters would turn on the White House and Congress if their high expectations were not met," adding that dissatisfaction with soaring deficits and "overreaching" by government into the private sector had the result of turning independent voters–who he called "the fulcrum of the American electorate"–against the Democrats in Washington and their home states.

Such repercussions are likely to continue to have an effect this November, he predicted, especially given the likelihood that unemployment will be in the double-digits come Election Day.

"People are looking for authentic leadership, not just in politics but in the business community as well, among consumers and investors," according to Sampson. "People are looking to see if rhetoric matches reality and hold them accountable for doing what they said they would do."

As a result, he said, "almost everyone is throwing out their old playbooks and calling audibles, coming up with new strategies to deal with the new realities presented by a much more engaged and angry public."

Earlier in the day, Joan Lamm-Tennant, global chief economist and risk strategist for Guy Carpenter & Company, told the PCI executives gathered here that the p&c industry has "a great opportunity today because we've come through the financial crisis much better than our counterparts in other sectors of the financial services industry."

She urged the p&c industry to launch "a full-court press to make everyone aware of this fact, to help us restore our credibility in terms of handling risk."