Insurance company executives and regulators faced off over whether the state oversight system should be reformed or tossed entirely during an impromptu exchange between two sets of panelists at a gathering of top industry officials.
During one panel discussion at the recent Property-Casualty Insurance Joint Industry Forum, insurer CEOs criticized the current state regulatory system as “archaic” and “broken,” offering fixes ranging from trusting consumers to make the right choices, to chucking the entire state-based approach in favor of a federal alternative.
Thomas Wilson, chief executive officer of Northbrook, Ill.-based Allstate, addressed a question regarding the lack of product innovation by saying that personal lines insurers are thwarted, in part, by a “regulatory environment that is so arcane you can’t get anything done.”
That statement prompted South Carolina Insurance Commissioner Scott Richardson to step up to an audience microphone and challenge the insurers to tell him exactly what regulators could do to cease being archaic.
Mr. Richardson also demanded to know why “800-pound gorillas” like Allstate are pushing for federal government solutions to catastrophe insurance problems. The South Carolina commissioner, participating on a prior panel consisting of regulators, had warned against letting Washington into the insurance business. (See NU, Jan. 14, page 7.)
Large personal lines carriers talk about such solutions “because we’re the ones on the hook,” Mr. Wilson said, choosing to respond to the second part of the regulator’s two-part question.
“But you did that voluntarily,” Mr. Richardson shot back.
“Yes sir, we absolutely did. But we recognize that the risk is too great for the return we’re getting,” Mr. Wilson said, going on to describe how Allstate has cut its exposure in Florida to about one-third of its prior size in recent years, and outlining the catastrophe insurance fix that Allstate supports—a system that would layer state and federal backstops on top of private insurance.
Addressing the first question, Mr. Wilson said, “I do think the state-based system is up for review and should be improved.”
“Time and again, I see regulators deciding that they know best and that they need to be out there” controlling prices and designing coverage forms, said Mr. Wilson, whose view was later echoed by Gerald Schmidt, CEO of Mutual of Enumclaw in Enumclaw, Wash., who referred to “onerous pricing oversight” that results in an “absence of freedom in a free-market economy.”