Posted on 27 Oct 2009
David A. Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI) highlighted major challenges facing the property casualty industry and encouraged the over 1,000 CEOs and senior executives attending PCI's Annual Meeting today in Orlando to be engaged in the political process as the association seeks to promote and protect the viability of a competitive private insurance market.
Sampson noted that sluggish economic growth; massive deficits and likely runaway inflation; the undermining of private insurance markets and the socialization of risk; 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. Net private investment fell to 0.1 percent of gross domestic product in the second quarter of 2009 — 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. Combined, they certainly will. These restraining forces on the economy will impact the top line growth potential of the property casualty industry.”
The second major threat at the macro level is growing deficits and the likelihood of runaway inflation. According to the Congressional Budget Office, our 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.”
The third threat Sampson identified involves the undermining of private insurance markets and the socialization of risk. He pointed to the health care 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.”
The fourth major threat to the industry is the divide and conquer strategy developing in Washington. “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.”
In addition to outlining the economic and political challenges, Sampson told the industry leaders that PCI is committed to engaging and shaping policy debates on their behalf. He noted that PCI has been working hard to provide thought leadership and reliable, objective data about our industry to those who influence public policy.
“By engaging in the process at all levels, we are able to anticipate and work to head off proposals that could negatively affect our industry,” said Sampson. “We have been successful thus far in preventing unintended, negative consequences from financial service regulatory reform efforts. PCI’s engagement with the Administration and Congress has largely carved out property casualty from potentially harmful initiatives, including most areas of the Consumer Financial Products Authority, executive compensation caps, and a Federal Resolution Authority.”
He concluded his remarks by encouraging the executives to tell the factual, positive story of the industry, and help policymakers in districts across the country understand their commitment to delivering on the promise to policyholders.