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Economic Effects on the Industry

A review of the current unpredictable economic environment as it affects the insurance industry, and some cautionary advice about regulatory changes for the industry, highlighted the April 29th address delivered by John Amore at Target Markets’ mid-year meeting in Baltimore.

A more, former chairman of the American Insurance Association, is a member of the Group Executive Committee and CEO of Global General Insurance at Zurich Financial Services Ltd. (Zurich). Named CEO of Zurich U.S. in 2000, he became a member of the Group Executive Committee seven months later and was appointed CEO of Zurich’s North America business division. Since 2004, Amore’s primary concentration has been directed toward his global leadership role. Relating closely to his global responsibilities with Zurich, he is also an elected partner with the Partnership for New York City, an organization dedicated to maintaining the city’s position as a global center of commerce and innovation. He also serves on the U.S. Chamber of Commerce’s board of directors.

Commenting on current economic conditions, Amore noted that the commercial property and casualty business has been operating within a particularly difficult and unpredictable environment. “We have had considerable diminishment of surplus within the P&C industry,” he said. “We’re now coming off a period of declining prices for about five years that was eroding the P&C industry’s profitability. But we have seen positive pricing changes in the first half of this year. Getting the pricing right is the main thing, which requires the knowledge to be competitive while protecting the profit margin.

“How does all this relate to program administrators? I position all of this as a positive development for them. We believe that the program business has actually performed better than other businesses over the past five years, and we think that’s reflective of the stability delivered by the program administrators’ province through deep knowledge of their customers and the insight they share with the underwriting world. All of that allows agents and carriers to really focus and to provide the coverage to be mutually effective good partners. At Zurich, in recent years, we’ve seen the building of a depth of knowledge about how product lines work—deep knowledge in the areas of underwriting, claims capability, and in our marketing—and in dealing with stronger growth lines when partnering with program administrators.”

Amore lauded the Target Markets Program Administrators Association for its role in nurturing those stronger ties between agents and carriers. “Where else can you get the unique collection of people to network for the mutual benefit of all of us—to gain a deeper knowledge of how to obtain and develop programs in an effort to learn, understand, and then translate information into bona fide operating methodologies that help you grow? We find this to be an invaluable opportunity.”

While citing attendees and their associates for a continual 10-year growth in insurance program business, Amore expressed concerns and suggested cautions in terms of some short- and long-term challenges.

“We’re all aware,” he said, “that right now there is so much pending regulatory change for our industry. We don’t know, of course, how it’s going to play out. But we’re now well beyond the initial federal charter option of 1999 that we tried to advocate in recent years. Clearly, it’s now taking on a life of its own, with more concern evolving from the broader financial services sector and less from the P&C insurance industry.

“Over-regulation could become an impediment to the insurance industry in terms of providing risk protection to our customers. The subject is political in nature, and is likely to continue to be that way over the next few years. Risk, and the aversion to risk, are key elements of this issue facing program administrators. And, of course, so is the matter of profitability.”

In summarizing his address, John Amore said, “Regulation or deregulation is a protectionism issue of hot debate on both sides of the political aisle in Washington. I heartily recommend that you make your voices heard. It’s an issue well worth staying tuned for. We must make certain that we protect our customers. By doing so we protect our industry.”