On the Insurance Campaign

In the summer of 1776 when the delegates to the Second Continental Congress gathered to sign the Declaration of Independence and instantly become traitors to the English crown, Benjamin Franklin purportedly suggested that “we must all hang together or assuredly, we shall hang separately.”

Last week, 1,200 independent agents “hung” together in Washington, D.C. for our annual Big “I” Legislative Conference & Convention fly-in. And never before has this trek to meet with every single member of Congress been more important. On the line for our industry are big issues: the survival of The McCarran-Ferguson Act, renewal of The Terrorism Risk Insurance Extension Act (TRIEA) and optional federal charter and natural disaster reform legislation. Know that action—or, in some cases, inaction—by Congress on any of these topics has the potential to radically change the way you do business and the way the business of insurance is conducted in the United States.

Be assured that this band of brothers and sisters who came to D.C. is no ordinary group of independent agents. They are the best of the best! They are “podium people” and good “people persons;” they are articulate, connected in their community and have strong relationships with their elected leaders. Every one of them gave up time with their families and businesses to advocate on behalf of all of us. And so, for their efforts and their productive work, they enjoy the gratitude of our entire membership of 23,000 agencies. Not only did they effectively put forth our issues, but they also carried a lot of water for our insurance company partners.

The Big “I” and most of our insurance company friends agree on many issues, but not all of them. For example, we agree that extending or making TRIEA permanent is a good thing for America and for our industry. We also agree that preserving The McCarran-Ferguson Act is critical because the law allows the pooling and sharing of loss data between companies. This actually allows smaller companies to compete in certain geographic regions or certain lines of insurance where using only their own data would not give them the confidence derived from the “law of large numbers.” McCarran-Ferguson also permits organizations like ISO to promulgate standard insurance forms, which helps consumers understand what insurance coverage they bought and helps agents communicate clearly about coverages available in a way that minimizes their E&O exposure. Without standardized policy forms, consumers would be forced to compare apples to oranges when shopping for insurance.

There are, however, issues where the Big “I” and some insurance companies disagree. The most notable is their promotion of an optional federal charter (OFC), which would allow companies and agents to select if they wish to be regulated by state governments or the federal government. The proposed OFC bill also calls for deregulation of rates and forms. On the surface, this measure might seem like a good idea; however, we believe that, after further analysis, this clearly is not the case. We believe that it is not good for consumers, that it will make it more difficult for agents to conduct business and it probably is not even good for the companies that wish to enact it!

First, the mood in Congress is currently quite hostile to our industry. Asking for optional federal regulation, which is really massive deregulation, might well be tantamount to mandatory federal regulation. Coupled with the possible appointment of an aggressive and unfriendly federal insurance regulator who has punitive inclinations and broad enforcement powers, we could end up with a nightmare scenario that even the most ardent company supporter of OFC would regret. Furthermore, in light of all that is happening in the Gulf region, Florida and the rest of coastal America, I suspect there is little appetite in Congress to deregulate rates and insurance forms. A more thoughtful and pragmatic middle ground is our position: Let the federal government set some minimum standards for all states to follow that lead to uniformity and modernization while preserving the better elements of state regulation.

And so, as it was in 1776, our visit to Washington, D.C. was but the beginning skirmish in what promises to be a long campaign on many fronts with some arduous days ahead. In the coming months, we shall keep you posted through our many venues on the progress of these issues—our successes as well as our travails. While the future is uncertain, we shall continue to commit our considerable resources in staff, volunteer time and talent in promoting and protecting the independent agency system. You have my word on this!

Alex Soto
President