Insurers vow ‘muscular’ response to over-regulation

Insurers aren’t known for their aggressive pushback against overly meddlesome regulations. American insurance companies – like any massive industry – have a large lobbying presence. But they tend to tread carefully around regulators for the obvious reason that insurance officials have much power to approve or reject rate hikes, especially in California. It’s dangerous to provoke those who have so much sway over the bottom line.

That’s why this headline in the British-based trade journal, Intelligent Insurer, has caused quite a buzz: “PCI will be muscular as we continue to combat regulatory overreach, says CEO Sampson.” PCI is the Chicago-based Property Casualty Insurers Association of America, which represents “1,000 companies that write 35 percent of the nation’s home, auto, and business insurance market,” according to its web site. CEO David Sampson recently gave some remarks.

The publication summarized them as follows: “A sharp increase in the instances of state regulators making requests for data from insurers is a major cause for concern” for PCI, “adding to an already big regulatory burden and increasing costs at an already challenging time for the industry.” Specifically, Sampson said, “Some of these calls have absolutely no connection to the primary purposes of insurance regulators, which should be to assess the market conduct of insurers and their solvency.”

In July, I authored an R Street white paper that looked at one egregious instance of what Sampson references. California Insurance Commissioner Dave Jones wants insurers who write business in California to divest “voluntarily” from most thermal-coal investments under the guise of protecting insurance companies’ solvency. The department will also publicize companies that don’t comply. The “Carbon Risk Climate Initiative” requires them to answer myriad questions about their investments. Again, the stated goal is to assure solvency.

In reality, Jones seems to be using the agency’s legitimate authority to make sure that insurance companies have the wherewithal to pay any future claims to venture into a dubious crusade that has some fairly obvious political benefits for ambitious politicians. Jones can say he is battling climate change, even though the potential long-term risk of coal-related investments already is reflected in the price of insurance company stocks. Furthermore, as the study pointed out, these investments represent a tiny fraction of the companies’ overall portfolio. In other words, there is virtually no insolvency risk here.

Sampson, as reported by Intelligent Insurer, echoed this point: “The data calls that Sampson cited as being unreasonable include a request by the California Insurance Commissioner for insurers to annually disclose their carbon-based investments including those in oil, gas and coal, and another by five states that required insurers to disclose levels of diversity in their workforce.”

It’s one thing for a think tank to point out the obvious, but another thing for the insurance industry – usually as careful in its public statements as it is in its investment portfolio – to vow to speak out more aggressively against such overreach. “Our members are concerned and have directed us to be more muscular in our approach to pushing back against that trend,” according to Sampson.

The specific approaches noted in the news report were fairly general, so it remains to be seen what this might actually mean. But Sampson’s words were significant enough to garner attention in Great Britain. If the industry follows this up with action, it might even get some attention in Washington, D.C., and even in Sacramento. It’s about time.

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