Expect More Fed Pressure If Dems Control Washington, Says PCI Head

The chief executive of the Property Casualty Insurers Association of America, Des Plaines, Ill., said he believes if the Democratic party expands its majorities in Congress next year and perhaps even win the White House, the insurance business will face the threat of an expanded federal presence that will unite the industry.

PCI President and CEO David Sampson, in an exclusive interview today at the National Underwriter headquarters office in Hoboken, N.J., said he believes the effect of complete Democratic control in Washington would be a “much more intrusive” presence from “the whole weight of the federal bureaucracy.”

Such an “existential threat,” he said, would spur industry associations to work more closely together despite their differences on certain policy issues, such as the need for an optional federal charter.

PCI, he said, is focused on insurance regulatory reform and improvement, either through state or federal action, and is currently concerned about existing Congressional and executive branch efforts PCI believes would mean redundant scrutiny and regulation of the industry.

He mentioned a provision creating an investigatory post in the Senate bill extending the National Flood Insurance Program, and language in the Treasury’s proposal for an optional federal charter.

Mr. Sampson–who took over at PCI 10 months ago after leaving a Bush Administration post as deputy secretary of the U.S. Commerce Department–said Treasury may not have realized the implications of their OFC draft, which PCI attorneys believe could, as written, subject insurers to dual federal-state regulation, and thus negate the “optional” part of an OFC.

Under the Treasury blueprint, even for those with a state charter, federal authorities would appear to reserve a right to regulate part of the insurer’s operation, he said.

While noting that the OFC language used in the blueprint raised “a real red flag,” he said the Treasury proposal “is not well fleshed out at this point,” suggesting the possibility of dual regulation might be unintentional. Insurers will seek clarification as the proposal progresses, he said, calling the possibility of dual control the “worst of all worlds.”

Meanwhile, in the Senate flood bill, there is provision for an “ombudsman” within the Federal Emergency Management Agency, whose job it will be to monitor insurers that administer flood policies, making sure they do not classify any wind damage claims as flooding so that the NFIP would have to pay. The House bill does not include such a provision.

Mr. Sampson said flood claims are already subject to five levels of arbitration, mediation and review, and that addition of “this special investigator” would be a case of “classic redundancy,” creating a position where insurers would be asked for material because an official was looking for something to do.

He said PCI was happy that insurance industry lobbying had managed to kill a provision providing the new post with subpoena power, and was also glad that efforts to expand NFIP to cover windstorms was defeated.