“Our industry is evolving and changing every single day,” said Robert Rusbuldt, CEO of the Independent Insurance Agents and Brokers of America (IIABA) during the Opening General Session of the IIABA 2002 InfoXchange in New Orleans, La.
Rusbuldt was joined by CEOs Ramani Ayer of The Hartford, Ernie Lausier of Encompass Insurance, Greg Murphy of Selective Insurance, Mike McGavick of SAFECO and Tom Van Berkel of Main Street America Group to discuss exactly what the industry is evolving to in the future.
McGavick offered some humor when presented with the question, “How long will the hard market last?” His answer: “Two hundred and thirty-three more days.”
On a more serious note, McGavick added, “What we do know is that the drivers that have lead to this market change are still present. And particularly after the news coming out of Monte Carlo; and the real disgust with their own results that the reinsurers are now communicating; I suspect that could add additional fuel to this market. So I see on both sides the commercial lines side and the personal lines side, a continuation of this market for at least a year or two years, it’s hard to say after that.
“The drivers are still very much accelerating,” McGavick said. “I would say also that we know this is tough on your customers. But we also know this is a time when real value is added by independent agents. Good independent agents shine in the hard market.”
The issues surrounding the hard market were a hot topic of discussion as the CEOs offered their take on the homeowners crisis and terrorism insurance, among other concerns.
“Homeowners is clearly a market in disarray,” Lausier said, and offered suggestions on how to improve the market. “Number one, we do need to take rates up. Companies must get better at handling claims. Relative to mold and issues of that nature, companies have to have the freedom to price.”
“The bottom line is, companies need to do a better job of understanding what their exposures are, and then being able to charge the appropriate price,” Van Berkel added. “Obviously we need to find a way to either be able to exclude that coverage [mold] or to include an appropriate charge for it.”
Ayer discussed the continuing impact of asbestos on the market. “Two or three years ago, insurance carriers would say ‘we’ve really gotten most of our asbestos problems behind us.
“Truth of the matter is today asbestos is a crisis in the insurance industry. There is such a wave of claims that are coming in. Over 90 percent of claims paid in the asbestos system have no impairment…. There are six states in the country where a majority of this litigation is being targeted.
“Seventy percent of these cases are being filed in Mississippi, with one percent of the country’s population in Mississippi…. We must do something about it,” Ayer added.
Rusbuldt noted the pressing need for terrorism reinsurance stemming from the events of Sept. 11 and the progress on Capitol Hill in regards to terrorism coverage.
“I believe we need terrorism backstop,” Ayer said.
“Principally because… we lack reinsurance on nuclear, biological and chemical events.” Ayer noted that Congressman Baker addressed the issue at a recent meeting with CEOs during the InfoXchange, saying that the administration is close to reaching an agreement bridging the gap between the House and Senate bills addressing terrorism coverage. Both sides have been unable to concur on the terms defining the amount of money insurance companies would be liable to repay the government in the event of another terrorist attack. “I’m optimistic that we will get a bill,” Ayer added.
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