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PHILADELPHIA — Federal involvement in insurance regulation would be beneficial to insurers and their customers because it could provide for more consistency across state and country borders, according to some insurance and risk management experts.
“I think the federal regulatory landscape is in flux right now,” Paul Horgan, head of commercial insurance for Zurich North America in New York, said at the Philly I-Day 2017 conference in Philadelphia on Thursday.
“We’ll see if there are any changes to (the Dodd-Frank Wall Street Reform and Consumer Protection Act),” he said. “State regulations are largely unchanged. Even though there have been more Republican administrations coming in, things have been relatively stable. We do think there’s a place for some federal regulation or look at insurance. Having a single point to help us coordinate and make sure there is a path forward for the industry to operate across the globe and for us to be compliant across the globe is very important. Sometimes an unpopular position, but we do think there is a role for the federal government to try to create some consistency across the globe.”
Workers compensation is an example of the challenges that companies face in trying to ensure they have consistency across their organizations and insurance programs and where federal involvement would be helpful, said Nancy Wilson, director of quality assurance risk and safety for food retailer Wawa Inc. in Media, Pennsylvania. For example, employees can experience the exact same injuries, but the comp costs and the handling of their claims can be completely different state to state, she said.
Both competition and consolidation in the insurance industry are likely to continue, according to the speakers.
Zurich American Insurance Co. is one of the consolidators, having purchased crop insurance provider Rural Community Insurance Services last year, Mr. Horgan said. The top five insurers control only 40% of the market, with the other 60% spread out among other insurers, leaving plenty of opportunity for additional consolidation because “nobody really dominates the marketplace,” he said.
“The competition today is as fierce as ever,” he said. “There’s obviously a tremendous amount of capital. We’re overcapitalized for the risks we’re trying to insure today. There has been some consolidation in the industry. But what we’ve also found is there is an abundance of new competitors coming in. When clients of ours used to go out to market two years ago, brokers would go out to four or five markets for a competitive bid. We’re now seeing that going out to seven or eight markets.”
Consolidation in the insurance industry will continue as long as there is an abundance of capacity, said Lynn Serpico, executive vice president and U.S. CEO of multinational clients for Aon P.L.C. based in Stamford, Connecticut.
“We saw a few high-profile mergers over the last 18 months, and the idea there was that it would add capacity and not take away,” she said. “We still have a lot of new entrants into the market, and I think many of the clients in the room are seeing that on their renewals, as well as the carriers. It’s very competitive. I think for the near future, I would expect more.”
“From a client’s perspective, you would think having more capacity and more competition would be a great thing across the board,” Ms. Wilson said. “I think it is a good thing for the industry, but it also makes for some real tough decisions on the part of the customer. From Wawa’s perspective, pricing is great, but I need to make sure long term I’m with the right partner and that partner has the capacity to stay with us long term as we continue to grow.”
Multiyear rather than annual insurance renewals would also be helpful both to insurance buyers and their insurance providers, particularly in acknowledging the long-term relationships insurers have with their clients, Mr. Horgan said.
“I am all for longer-term renewals,” Ms. Wilson said.
MIAMI — The third and final draft of the National Association of Insurance Commissioners’ cyber security model law won’t be ready for consideration until 2017, according to South Carolina Insurance Director Ray Farmer, the vice chair of the NAIC’s cyber security task force.