The Entire Industry Has A Stake In Regaining Credibility With Congress
In the aftermath of Sept. 11, the property-casualty segment of the insurance industry has been in the spotlight, both because of the enormousness of its losses and because it is seeking a backup reinsurance arrangement from the federal government for future losses that may arise from terrorist activities.
The life insurance industry has had a much lower post-Sept. 11 profile, but its proposal for Congress to establish a commission to see if a backup might be necessary for life insurers after any future terrorist event has drawn little, if any, interest on Capitol Hill.
Once all the activity surrounding terrorism reinsurance legislation subsides, the industry might do well to focus on another issue; namely, its credibility problem both on the Hill and with the Bush administration.
It doesn’t help the life insurance business that for most people “insurance” means all insurance, with little or no differentiation between the life and p-c segments. Credibility problems on one side invariably paint the other side with the same brush, and this is true even in Congress.
That is why the life business needs to pay attention to how any proposal to aid the p-c business fares in Congress. So far, the reaction is not encouraging.
The consensus proposal developed by the insurance industry to create a private mutual reinsurance pool backed by the U.S. Treasury as the “reinsurer of last resort” was dismissed out-of-hand, and on a bipartisan basis, both at the Treasury Department and by the relevant Congressional committees.
The widespread view seems to be that the industry is either exaggerating the risk or simply trying to dump its potential losses on taxpayers.
The industry needs to ask itself why it is treated with such suspicion among the nation’s lawmakers.
Consider some recent comments from members of Congress and their staffs. Sen. Bill Nelson, D-Fla., who was his state’s insurance commissioner in the aftermath of Hurricane Andrew, said the industry has a history of trying to dump its losses on the taxpayers when possible.