At NAMIC, The Door’s Wide Open to Companies of All Sizes

Chairman Tim Hegarty Explains How His Trade Group Serves Big and Small Alike

What happens when you put giants like State Farm, AIG, Nationwide and Liberty Mutual in a room with tiny farm mutuals like Husbandsmans Mutual, Lumber Mutual and Falls City Mutual and give them equal voice?

You get the National Association of Mutual Insurance Companies (NAMIC).

The most recent news in property/casualty trades has revolved around the merger of the former Alliance of American Insurers and the National Association of Independent Insurers into the super-sized group, the Property Casualty Insurers Association of America (PCI).

As big as it is, PCI is not the biggest property/casualty trade association; NAMIC is. NAMIC boasts more than 1,350 member companies that write 41 percent ($170 billion) of the country’s property/casualty premium. NAMIC membership includes four of the seven largest carriers, every size of regional and national insurer and hundreds of farm mutual companies.

PCI is composed of more than 1,000 companies, also representing a broad cross-section of insurers. PCI members write $154 billion in annual premium, 38 percent of the market.

That still leaves the American Insurance Association with 450 member companies writing $115 billion.

Part of the job of getting the State Farms and AIGs together in a room with the farm mutuals belongs to F. Timothy Hegarty, chairman of NAMIC for 2004, who also runs a regional mutual insurer, Norfolk & Dedham Group, based in Massachusetts.

The Norfolk & Dedham Group consists of three mutual insurance companies founded in New England in 1825. The group includes Norfolk & Dedham, Dorchester and Fitchburg. The company provides property/casualty insurance in Massachusetts, Rhode Island, Maine, New Hampshire, New York and New Jersey through independent insurance agents.

Now president and member of the board of directors, Hegarty joined Norfolk & Dedham Group in 1984. He was elected chairman of NAMIC in September 2003.

The Dedham, Mass., headquarters of Hegarty’s company looks like a modest-sized insurance company headquarters in New England should look: traditional brick, with white trim and pillars, nestled on nicely landscaped grounds.

Hegarty, on the other hand, does not quite fit the stereotype of an insurance company executive, let alone chairman of the nation’s largest trade organization. A former consumer affairs attorney in the state attorney general’s office, Hegarty appeared casual in his dress and demeanor when interviewed recently by Insurance Journal. His greeting included a big grin and firm handshake. Traces of a Boston accent confirmed his local roots. There were no assistants to escort him. The door to his office remained wide open.

Why would a company join NAMIC? Insurance Journal asked.

“One of the real advantages of NAMIC is that it is a broad trade group,” Hegarty said. “It is not concentrated in membership by the size of companies. It is not dominated by a small group of companies. Overall, it has a very democratic orientation in its governance. So that if you’re a company who wanted to be active and be able to help shape the policy of the trade group, NAMIC would be a good option because whether you’re large or small, you’ll have some input.”

But if larger companies have no more clout than smaller insurers, why would they join? “Some of the larger insurance companies see value in being aligned with the grass roots-type organization that NAMIC is, because even though money is important in Washington, the grass roots is also important and makes a big difference in Washington.”

NAMIC strives to make a difference in Washington, D.C., by flexing its local muscle. Its Congressional Action Program and Congressional Contact Program present opportunities for NAMIC members to expand their relationships with members of Congress. Members not only visit their elected officials in Washington, but also in meetings back home.

There is a lot going on in Washington that concerns Hegarty and his fellow company executives. The list includes renewal of the Terrorism Risk Insurance Act (TRIA), class action reform, curbs on asbestos litigation, federal versus state regulation, as well as tax and governance issues.

While he worries that politics may sidetrack class action and asbestos reform this session, Hegarty senses that prospects are probably good for a TRIA renewal.

“At least in the short run, it appears to have the best shot at passing,” he said. “It seems that while there are differences over the scope of TRIA and there are issues over insurance companies’ retentions, debates over agricultural concerns and whether personal lines should be included, that despite these differences there is an overall consensus that at least we need to continue TRIA in some fashion. There seems to be an overall consensus that not only is this necessary, it is necessary that it be done this session.”

NAMIC supports legislation to extend TRIA for two years beyond its scheduled sunset on Dec. 31, 2005 when the program and the backstop are set to expire.

The issue of TRIA may be on the front burner currently, but perhaps no issue is of more concern to NAMIC members in the long term than that of improving state regulation and limiting federal regulation of the industry.

Hegarty said state regulation is not perfect but NAMIC members prefer it to the “unknown” of federal regulation.

There have been several proposals for the “unknown,” including one to impose federal standards on state regulation and another offering the option of a federal charter for insurance companies.

Supporters of state regulation and the states themselves, which collect $10 billion in premium taxes from their regulatory efforts, have been under pressure since the passage of the Gramm-Leach-Bliley Act (GLBA) to modernize and make state regulations more uniform.

NAMIC supports the modernization efforts that are underway through the state insurance departments and state legislatures.

In debating the regulation issue, Hegarty said he believes it is key to recognize that property/casualty insurance is different from life insurance and from financial services. “Life products and others can be more uniform. Property/casualty varies more by region and state. Property/casualty has to consider the geography of hurricanes, earthquakes and agricultural issues. These exposures justify local regulation and make more sense. With a whole life policy, it really doesn’t matter whether you are in Idaho or Hawaii,” Hegarty said.

While some type of federal standards might make sense, Hegarty dismissed the notion of an option of a federal charter as bad politics, bad policy and bad for NAMIC members.

“It is in part because of the fear of the unknown, because the nature of regulation could then depend on what party is in power in Washington,” he cautioned. For instance, the type of regulatory philosophy that is now in Massachusetts could be translated to Washington if power shifted to another group.

“It is not so much the structure as it is fear of putting all of your eggs into one basket. If there is a strong federal presence and that is a bad regulatory policy from Washington, then it is bad in 50 states.”

As strong advocates of state regulation, Hegarty said he and others at NAMIC worried that their arguments would lose credibility if they were not doing all they could to assist the efforts to improve state regulation. If state regulation didn’t improve, the arguments for more federal intervention would gain favor.

So NAMIC recently enhanced its state advocacy efforts. NAMIC was founded by state trade groups and today it maintains alliances with dozens of state groups, including ones in Pennsylvania, New York and across the Midwest. These state groups maintain watch over state issues, leaving NAMIC to concentrate on federal and national matters.

But NAMIC decided that more could be done in some states, including California and those in New England. It divided up the country into regions and named state managers to focus on moving the agenda of improving state regulation.

“While the Washington office remains strong, we now have beefed up state efforts as well,” Hegarty said.

The person overseeing this reorganized NAMIC on a day-to-day basis is Chuck Chamness, who was named association president after a selection process headed by Hegarty. Chamness is filling the shoes of the retiring Larry Forrester.

Unlike insurance companies that can measure their progress in ratios and ratings, trade groups have to gauge the effectiveness of access and influence. So how do they know whether they are being effective?

Hegarty acknowledged it’s not easy to judge. In terms of how to measure this, he said it’s important to listen to feedback from members, officials and others. Look to see how involved the members of the organization are. Determine if the staff is respected on Capital Hill. And find out if, when NAMIC calls, the door is open.

Topics Carriers Legislation Agribusiness Washington Massachusetts Property Property Casualty Casualty