Independent Agents in High Demand

When hurricane season hits, independent agents are called upon to lend their expertise and advice not only to their clients but also to the general public.

Capitol Hill is no exception. Over the years, independent agents have answered the call to testify at congressional hearings and educate lawmakers and their constituents on important insurance topics such as terrorism insurance, flood insurance and especially insurance issues related to hurricanes and other natural disasters.

When Congress returned from recess in September, one of the first hearings on the schedule focused on natural disasters. As always, the Big “I” was there to help educate Congress and was the only agent/broker trade association invited to send a witness. Steve Spiro of Spiro Risk Services in Valley Stream, N.Y., testified on behalf of the Big “I” at a joint hearing of the House Committee on Financial Services Subcommittee on Housing and Community Opportunity and the Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises to discuss H.R. 3355, the Homeowners’ Defense Act of 2007, introduced by Reps. Ron Klein (D-Fla.) and Tim Mahoney (D-Fla.).

The Klein-Mahoney bill has two main purposes: to create a National Catastrophe Risk Consortium and to create a National Homeowners Insurance Stabilization Program. Both programs are intended to help make state reinsurance programs and the private insurance market more stable, ultimately making catastrophe insurance more available before and after a major disaster. The consortium program would allow multiple states to pool their catastrophic risk, thereby hopefully achieving an economy of scale and risk diversity that will lead to a lower cost of reinsurance than states could achieve independently. The stabilization program would allow the Treasury Department to make loans to state reinsurance plans to ensure their continued liquidity in the wake of a natural catastrophe.

Spiro expressed the Big “I” belief that the bill deserves serious consideration and that these proposals
could potentially be part of a comprehensive solution to the natural catastrophe insurance problem. He stressed that the key to the success of any solution is how the private market will react and whether it will result in increased coverage.

Spiro pointed out that one strength of the Homeowners’ Defense Act of 2007 lies in its attempt to have a plan in place to encourage greater availability of reinsurance for the private markets. Spiro stressed that the goals of the legislation are consistent with the Big “I” principle that the best solution is for a program to be in place before the events happen.

He also provided the committee with background on the issue and how states have attempted to increase insurance capacity and decrease catastrophic events’ risks and costs. He outlined how state governments have attempted to stabilize insurance markets by implementing a variety of policy options––and how these efforts have failed to adequately address massive natural disasters and ultimately leave the country unprepared.

Spiro reminded the committee that this is a national problem that needs a national solution, and despite the longstanding Big “I” position that the insurance market is best served by limited federal involvement, the association believes that a federal solution to the issue of natural catastrophe insurance is necessary to help provide capacity and fill a void that the private market can not and will not service.

The Big “I” was well represented, and Spiro reiterated that our members approach the issue of natural disaster insurance from the very simple perspective of serving consumers’ needs, whether it is helping them secure coverage and protect their families, their homes and their businesses prior to an event, or assisting consumers after an event to ensure that claims are paid quickly and fully.

Patrick Royal (patrick.royal@iiaba.net) is Big “I” director of public affairs.

Coastal Agents Share Experiences with Leaders

Steve Spiro was not the only independent agent asked to share his experience and insight into natural disasters with government leaders. Big “I” Past President Alex Soto and Mississippi agent Dave Treutel also briefed leaders on their experiences dealing with past storms.

Soto represented the association on a panel of insurance industry executives at the annual meeting of the Southern Governors Association in Biloxi, Miss. The goal of the session was to explore how governors and the industry might better work together to ensure greater stability in residential and commercial insurance markets in both pre- and post-catastrophe scenarios.

Soto told the governors how he witnessed the effects of the coastal insurance availability crisis firsthand in Florida. He also outlined for the governors the challenges that he and other agents face in hurricane-prone regions. He then urged the governors and policymakers across the country to work with the private sector to identify ways to return insurers and much-needed capital to coastal regions.

Treutel shared his firsthand account of Hurricane Katrina when he participated in a Capitol Hill briefing put on by the RAND Corporation and hosted by Rep. Gene Taylor (D-Miss.) entitled “Wind Damage Insurance Crisis on the Gulf Coast.” He shared stories from Katrina and gave possible solutions to problems agents and consumers experienced during the historic storm.