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What is a lobbyist's most important job? Providing reliable information, says Leslie Cheek.

Mr. Cheek should know. For 25 years, he was a lobbyist, first for the American Insurance Assn. and later for Crum & Forster Group. During that time, he was respected as one of the insurance industry's most skilled and hard-working lobbyists in Washington.

Mr. Cheek also knew the fine art of bridging differences. Behind the scenes, he developed the compromise that led to the enactment of the Risk Retention Act in 1981. Mr. Cheek convinced congressional staffers that there was no need for federal chartering of the groups, as had first been proposed.

During his tenure in Washington, Mr. Cheek has seen -- in some ways for better and other ways for worse -- how lobbying has changed.

Now retired, Mr. Cheek, 56, lives on a 38-acre horse farm in the Virginia countryside and occasionally consults on insurance issues.

He discussed his career as a lobbyist and other issues with Editor-at-Large Jerry Geisel.

What did you like about being a lobbyist?

I liked the give and take, the opportunity to deal with intelligent, highly motivated people both in the private and public sector as well as deal with intellectually stimulating issues and the chance to find some common ground where there were divisions between the public and private sectors.

What did you dislike about lobbying?

The main thing I disliked was -- at the end -- the political fund-raising situation that kind of forced both members and the private sector to do kind of a dance that had more form that substance to it.

What do you mean?

There was a time when issues were decided more on the merits than on who had the political power through fund-raising and the like. The process became more politicized as time went by.

The other thing I disliked was the post Watergate-reforms. Even though one could make a strong case for government in the sunshine, what the lack of a closed mark-up does to a member is to force him or her to offer bad amendments for the sake of a local interest group that, were the local interest group's representatives not sitting in the room, he or she would be able to dish off and say: "I know this is a lousy amendment. I don't particularly want to push it. But if my folks ask you, please tell them that I fought hard for it and that it went down only after a strong fight."

As a result, now there is much more posturing, much more grandstanding, too much of what I would call sound-bite media, where the issues truly get lost.

Are the problems caused by so much money in the system and the openness?

There is that -- the money and government in the sunshine. The other thing is that, like it or not, issues are becoming more complicated. When I think back to the mid-60s, where the issue was: Are we or are we not to make sure insurance is available in our central cities? The simple answer is yes, we are, and here is a simple way to do it: state pools to whom members can be sold riot reinsurance. Very straightforward.

Contrast that with the Clinton health care proposal, which was well over a 1,000 pages. So, you can't blame process entirely for what is dislikable about politics now. You also have to consider substance.

How has lobbying changed?

Dramatically. When I worked on the Hill in the mid-1960s, the total staffing was around 7,000. As recently as the last Republican takeover, it was well over 20,000.

Proliferation of subcommittees, a great deal more process for every bill to go through. The other major change is that before, the game on Capitol

Hill was very much a Washington game. Everyone had their representatives here. Everyone knew who they were. Most of the lobbying took place in Washington.

Now, with the explosion of grass-roots organizations, the development of highly motivated interest groups -- like the Christian Right -- and single-interest lobbying groups, the process has become far more diffuse.

What are the implications of that?

The outcomes are far less predictable. It takes far longer to enact any of the initiatives. Look at product liability as an example. It still hasn't happened.

The Product Liability Alliance was organized in 1981 and here it is 1997 and we still have not enacted a broad product liability law.

Maybe that is because it is a tough issue.

It is a tough issue. It illustrates how diffuse things have become. In the early years of the product liability reform effort, the coalition existed primarily so each member of that coalition could count on the support of others for its particular fix.

For example, the tool and die makers wanted a statute of repose because their equipment lasted forever. Same with the general aviation manufacturers.

Automobile manufacturers wanted an end to joint and several liability.

There was not a core consensus as to what the important aspects of product liability reform were. But, as we've seen, the number of issues that the bill deals with dwindles each year.

What are the most important functions a lobbyist performs?

The most important function is providing information, especially when issues are complex. It is important for members to have as much information from the various interest groups as possible in order to reach a rational and sensible position.

The second most important function is to build a bridge between the interest he or she represents and the public interest. Sometimes, it is easy to find a way to build that bridge. At other times, it has proven extremely difficult to do.

For example, we were able to do that with a fair degree of ease in the Risk Retention Act. But in product liability reform, it has been extremely difficult to get that bridge built.

What makes for a poor lobbyist?

One who is too insistent on getting everything he or she wants. It is important to understand, as the song goes, when to hold 'em and when to fold 'em. Those who don't when to fold them make ultimately lousy lobbyists.

What is your opinion of insurance industry lobbyists?

The insurance community has grown progressively more sophisticated in its lobbying efforts. I remember, when I was a Hill staffer, one lobbyist came in and presented me with his organization's demands, all of which, he informed me, were non-negotiable. I think now the industry is far more sophisticated in its substantive approach to the issues and in its willingness to recognize that the rules of the game have changed.

The industry has been swift, as in health care, to adapt to the new grass-roots aspect of lobbying. It has mobilized its economic power through the political campaign contribution process. It has learned how to diffuse difficult issues. It understands the power of indirection, the power of the irrelevant to derail a change it does not want.

Can you give me an example?

The one that comes to mind most easily are the "Harry and Louise" ads that the Health Insurance Assn. of America put together. By focusing attention on a handful of minor provisions in a 1,400-page bill, the HIAA was able to mobilize public opinion against the entire Clinton health care package.

Are lobbyists from individual insurers more effective than those working for the trade associations?

I think there was a time when the answer to that would have been yes. But now the trade associations have staffed up to the point where by themselves they are formidable forces. What is more important, there was a time when the trade associations viewed individual company lobbyists as a threat to their own individual viability.

Over the years, they have come to understand that the individual companies give them more muscle. There is a great deal of congeniality. Virtually all of the trade associations have the equivalent of the AIA's federal affairs subcommittee. They meet frequently and they divide up responsibilities. Now, you essentially have one well-oiled machine.

The other thing that has changed is the willingness of the trade associations to try to develop industry-wide consensus. The industry has discovered whenever it is divided, it fails. But whenever it is united, it more often than not succeeds.

What were some of the issues in which the industry failed because of divisions?

The most extreme would be the no-fault auto issue. You had a powerful, substantive reform that virtually the entire industry was behind. But the industry divided along traditional state/federal lines.

The example where it succeeded was ultimately the Risk Retention Act amendments, where the industry recognized that the original Risk Retention Act was a good idea but it needed some fine-tuning.

You played a key reform in the original Risk Retention Act. Why did you get involved?

The reason I got involved was that my company -- Crum & Forster Group -- was very active in the excess and surplus lines and reinsurance business. We were used to dealing with umbrella coverages and large excess limits.

Therefore, we did not see the idea of permitting business to band together to cover some level of their own exposures as a threat to our interests. In fact, we welcomed the opportunity to manage risk retention groups, to sell them whatever excess or umbrella coverages they needed.

We also recognized that insurance is much more efficient when it is utilized to cover catastrophic losses than when it is intended to cover losses from the first dollar. Administratively, it is much simpler.

You sort of viewed employers as getting together and taking care of this primary layer of coverage, with insurers providing reinsurance or catastrophic coverage?


The risk retention legislation was highly controversial. The insurance trade groups were greatly opposed. How did you fashion a compromise?

I looked at the positions that both the congressional staffers and federal officials had taken on one hand and the industry's on the other to see if there wasn't some way of accommodating both of those interests. I felt that the industry had a good point at being concerned about the creation of a chartering entity in Washington. I think it would not have taken much imagination to see that becoming a federal solvency regulator with the power of life and death or insurers.

On the other hand, it made perfect sense to me that particularly big business or lots and lots of small business had a perfect and legitimate argument in saying they ought to be permitted -- far more than state law at that point allowed -- to take on some of their own exposure.

If you had your own dollars at stake, you probably were going to care a lot more about loss prevention than if you knew your insurer would pay from the first dollar.

In short, I saw some public policy benefits in the positions of the advocates of risk retention were taking.

How did you derive the concept of "Let's have the states do it, but once a risk retention group meets the requirements of one state it could operate throughout the country?"

It was an idea that Mike Mullen, then counsel to the Senate Commerce Committee, and I arrived at. Mike and I had these long discussions in which I said that our companies basically felt that risk retention was an acceptable concept. But I also told him we agreed with the industry view that having this done by an industry czar, if you will, was unacceptable.

I said to Mike, "What was the problem that people who wanted to form risk retention groups are encountering?" He rattled off a list of things like countersignature laws, limits on the ability to self-insure. In short, all kinds of statutory state wrinkles that had the effect of hamstringing the ability of a company with far-flung divisions and the like to deal with an insurance problem in a unified way. I said if those are the problems, why don't you selectively eliminate those problems and just say if you as a risk retention group meet the regulatory standards in a licensing state you can then use that licensing authority in that one state as a shield against any law in any other state that would prevent the law of your chartering state from being applicable to your operations.

Did you get heat when you brokered this compromise? What were others in the industry telling you?

It divided along predictable lines. Producers, almost uniformly, were hostile because it meant an agent in a chartering state could write business for the entire group. The agents had a much larger stake in things like countersignature laws and the like than companies did.

In the company ranks, the divisions also tended to be along equally predictable lines. Those who wrote generally primary coverages opposed it, while those like us, AIG and Chubb, who were comfortable in the excess limits and umbrella business, did not see this as particularly onerous.

Sixteen years later, what has been the legacy of the act?

It has proven to be less significant than it appeared to be at the time. But, particularly because of the Risk Retention Act, states have become far more sophisticated in their approach to self-insuring entities.

Do you means developments like captive laws?

Exactly right. I've seen it happen many times. For example, just the fact that Congress was seriously considering federal standards for state no-fault automobile insurance laws spurred 16 states to enact their own no-fault laws because they recognized no-fault was a good idea, and secondly, because they saw their own action as heading off perhaps something far worse from their point of view at the federal level.

I think the same thing has happened in the whole area of captive chartering and self-insuring. The states have taken a far more pragmatic approach to insurance regulation in part because they saw that Congress was willing to act and eliminate through pre-emption laws Congress thought were economically damaging.

What has been an issue where the industry was dead wrong, a position that still makes you cringe?

The issue I would pick would be the earliest stages of product liability reform, where the insurance industry was willing to embrace as its own cause every single business' beef with state product liability law. The early bills were crammed with changes, many of which would have made absolutely no difference in the predictability of a product liability risk, which should have been our only focus.

The insurance industry would have been far better off -- indeed, product liability reform might have become law -- had the industry said: "We're having a problem with product liability. What are the four or five key issues that make it difficult for us to predict liability risk?" I still think they boil down to a very small number: the collateral source rule; a statute of limitations; a state of repose; joint and several liability.

So the bills became a lightning rod for the opposition?

Yes, because there was everything, including the kitchen sink, thrown in those early bills. It became very easy for the trial bar to focus on the irrelevant as a means of defeating the relevant.

Product liability was an example where the industry was just dead wrong in embracing all of business' beefs instead of focusing in on its own self-interest, which was the ability to better predict product liability risk.