Attack on Health Firms Is Assault on All Private Insurance, Warns P/C Chief

October 26, 2009

Attacks by President Obama and Congressional Democrats against private health insurers will have a “spillover effect” on other segments of the private insurance marketplace, a property/casualty insurance trade group executive has warned.

David A. Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI), said one of the major threats to the insurance industry today involves the “undermining of private insurance markets and the socialization of risk.” He pointed to the healthcare debate to demonstrate this point.

“The president and members of Congress have vilified private insurance companies as they have called for a public insurance option,” said Sampson. “Publicly they have attacked health insurers but I believe this messaging represents a fundamental assault on all private insurance markets. These attacks predictably will have a spillover effect that could jeopardize our industry as Congress moves forward on financial services regulatory reform, or a federal natural catastrophe proposal.”

Sampson, a former Bush Administration official, highlighted what he said are major challenges facing the property/casualty industry and encouraged the more than 1,000 CEOs and senior executives attending PCI’s Annual Meeting today in Orlando to be involved in the political process in order to protect the industry’s interests.

Sampson said that in addition to the undermining of private markets, sluggish economic growth, massive deficits, likely runaway inflation and a divide-and-conquer mentality in Washington are among the most substantial threats facing the industry.

“With unemployment on track to top 10 percent early next year, it’s hard to see a robust recovery ahead,” said Sampson. “The lack of consumer confidence continues to concern economists, and an unexpected drop this quarter doesn’t bode well for the near future. We simply are not seeing the kind of investment we need that will generate robust growth.”

He said that net private investment fell in the second quarter fell to the lowest level since 1947, protectionism is beginning to emerge, and personal, corporate, energy and health care tax increases seem to be on the horizon.

“Any of these economic uncertainties, by themselves, could suppress private sector investment and job creation,” Sampson said. “Combined, they certainly will. These restraining forces on the economy will impact the top line growth potential of the property/casualty industry.”

As a major threat to insurers at the macro level he cited growing deficits and the likelihood of runaway inflation. According to the Congressional Budget Office, the nation’s deficit in 2008 was $1.4 trillion — and the trend line is going up.

“The last time the industry faced this situation was in the 1970s, where raw input costs — repair/replacement — rose dramatically and companies were not allowed to recover costs through rate increases. For us, these economic conditions will create significant challenges,” he said.

Among the threats to the industry is “a divide and conquer strategy” developing in Washington, according to the PCI leader. “In this political and economic environment, it’s every man for himself as each industry or company seeks to cut its best deal and throw others under the bus.,” said Sampson. “We need to be aware of this tactic and work to ensure we are not vulnerable to it in the future.”

He said PCI and the P/C insurance industry have managed to achieve some successes in Washington despite the difficult atmosphere. He said the industry has been able thus far to prevent “unintended, negative consequences” from financial service regulatory reform efforts and has largely carved out property/casualty from the Consumer Financial Products Authority, executive compensation caps, and a Federal Resolution Authority.

PCI is composed of more than 1,000 member companies, which write more than $180 billion in annual premium and 37.4 percent of the nation’s property/casualty insurance.

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