Industry News

Days before he is set to speak in Washington, D.C. at a Property Casualty Insurers Association of America (PCI) roundtable discussion about international insurance regulation, former Connecticut Insurance Commissioner Thomas Leonardi gave an interview which reminded everyone about his well-deserved reputation for outspokenness.

In a wide-ranging interview with Best’s News Service, Leonardi said international regulators need to be more transparent in developing global insurance capital standards and maintain an open dialogue with the carriers they seek to supervise, as well as U.S. state regulators.

Leonardi is a steadfast supporter of state regulation of insurance. He sounded a warning about the Federal Insurance Office (FIO), a part of the U.S. Treasury Department.  FIO and the Treasury are now in negotiations for a covered agreement with European regulators, who have pushed the U.S. to adopt a system of federal insurance regulation similar to theirs. There are concerns that possible outcomes of these covered agreement talks could threaten the U.S. system of state-based insurance regulation.

“Since its creation, the FIO has often taken positions in direct contradiction to the views of the state regulators,” Leonardi said. “We are seeing this happen right now in the context of the negotiations around the covered agreement.”

“FIO’s approach is one of ‘we’ll let you know what happens’ as opposed to having the state regulators, that are ultimately responsible for prudential regulation of insurers in this country, actively at the table,” Leonardi said.

State regulators need to be involved in the process, Leonardi said, adding that he supports the Transparent Insurance Standards Act of 2016 (H.R. 5143), a bill endorsed by PIA that sets objectives for U.S. negotiators regarding international insurance standards, grants Congress 90 days to approve or reject proposed agreements, and mandates a public comment period.

“The state regulators regulate 6,600 insurance companies in this country and that is not going away anytime soon,” Leonardi said. “It’s really important that the Fed and FIO not enter into an agreement that is not supported by the state regulators. Otherwise you have chaos.”

Louisiana Gov. John Bel Edwards says his state had more than $8.7 billion in damage in both insured and uninsured losses from catastrophic flooding in August, and the figure will increase as officials finish assessing damage to roads and other public infrastructure.

A storm that started Aug. 12 dumped as much as two feet of rain in some parts of Louisiana over two days, and the flooding has been described as the worst disaster in the U.S. since Superstorm Sandy struck the East Coast in 2012.

READ: 6 Tips for Flood Survivors on Avoiding Fraud and Scams

Edwards said documented flood damage has affected more than 55,000 houses in Louisiana, and that could double as aid applications and inspections continue. He said initial evaluations show the majority of flooded households were resided in by people with low to moderate incomes, and 20 per cent of flooded homes were resided in by renters.

READ: Agent Tools for Flood Insurance

More than 6,000 businesses flooded, with more than $2.2 billion in damages to buildings, equipment and inventory, Edwards said. He also said there are “conservative estimates” of more than $110 million in damage to agriculture.

Louisiana Insurance Commissioner Jim Donelon says officials have said that the August flood event will be the fourth most costly event for the National Flood Insurance Program (NFIP). Approximately 28,000 claims have been filed with the NFIP, and Donelon expects that number to rise to approximately 30,000.

Aetna Inc. warned U.S. officials more than a month ago that it would pull out of Obamacare’s government-run health insurance markets if antitrust officials attempted to block its $37 billion merger with Humana Inc.

In a July 5 letter to the Justice Department from Chief Executive Officer Mark Bertolini, Aetna said that challenging the merger “would have a negative financial impact on Aetna and would impair Aetna’s ability to continue its support” of plans sold under the Affordable Care Act (ACA). Such a challenge would leave the insurer “with no choice but to take actions to steward its financial health.”

READ: In Reversal, Aetna Pulls Back From ACA

“If the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint,” Bertolini wrote. He said that the cost of litigation and debt taken on by Aetna, the need to plan for a breakup fee it would owe Humana, as well as cost savings already anticipated as a result of a successful deal, would all factor into Aetna’s need to pull back.

“By contrast, if the deal proceeds without the diverted time and energy associated with litigation, we would explore how to devote a portion of the additional synergies (which are larger than we had planned for when announcing the deal) to supporting even more public exchange coverage,” Bertolini said in the letter.

An agreement that would provide regulatory equivalency for U.K. and U.S. insurers could be fast-tracked for approval after Britain exits the European Union, according to Michael McRaith, the director of the U.S. Federal Insurance Office. U.S. and European Union officials are currently negotiating such a regulatory agreement, and until the U.K. completes its “Brexit,” the covered agreement would also apply to Britain, which is home to the world’s hub for specialty lines of insurance. A separate agreement covering UK and U.S. insurers probably would be needed once Britain goes through with the split.

“Our view is, until the U.K. withdraws from the EU, that we are dealing with the EU,” McRaith told members of the U.S. Treasury’s Federal Advisory Committee on Insurance, which is comprised of state insurance regulators and consumer groups along with many of world’s leading insurance companies, including Marsh & McLennan Cos., Inc., American International Group Inc., Lloyds of London and Liberty Mutual Co., and other insurance research and analysis groups.

READ: NAIC, Industry Renew Calls for Equivalency

There are concerns that possible outcomes of covered agreement talks between the U.S. Treasury Department and the European Union could threaten the U.S. system of state-based insurance regulation. PIA strongly supports the Transparent Insurance Standards Act of 2016 (H.R. 5143), which enhances Congress’s oversight of international deliberations relating to insurance standards by requiring the U.S. Treasury Department and Federal Reserve to consult with Congress and state insurance regulators before approving any international insurance standards.

A National Association of Insurance Commissioners’ (NAIC) panel has drafted recommendations to reform the National Flood Insurance Program (NFIP) as part of a congressional 2017 reauthorization, including measures designed to aid private flood insurance market growth. The panel has put forward objectives that include support for long-term reauthorization of at least 10 years in order to avoid short-term extensions and program lapses; encouraging greater private market growth; and encouraging mitigation to reduce losses.

The committee draft also supports final passage of H.R. 2901, the Flood Insurance Market Parity and Modernization Act, which clarifies that private flood insurance meets the mandatory purchase requirement. The bill passed the House in an overwhelmingly bipartisan 419-0 vote on April 28.

PIA supports the long-term reauthorization of the NFIP when it comes up for renewal in 2017.  PIA opposes the immediate privatization of the National Flood Insurance Program (NFIP), but supports sensible solutions for encouraging the growth of the private flood insurance market with measures like H.R. 2901.

The Federal Aviation Administration issued a rule in June that will make it easier to use unmanned aircraft systems — better known as drones — for commercial purposes such as aerial photography, equipment inspection and news gathering.

Insuring your drone, however, is anything but simple. Drones pose myriad risks, including damage to the drone itself, to people or property hit by a drone and invasion of privacy claims.

READ: The Latest on Drone Regulations

Homeowners or renters policies might — or might not — cover some or all of these risks if you’re flying a drone for fun, but it won’t cover business use. See PIA National’s one-page issue sheet, Hobbyist Drones (PIA member login required).

If you use a drone to make money, your general business insurance might cover the drone itself, but you usually need a specific aviation-liability policy to cover damage it inflicts on people or property. As with any type of insurance, you must read the exclusions carefully, and if you don’t understand them, talk to your agent.

PIA National is pleased to announce that National General Insurance has joined The PIA Partnership. “We are extremely pleased that National General Insurance, a distinguished company with a solid track record of supporting the American agency system, has joined The PIA Partnership,” said Robert W. Hansen, Jr., PIA National President. “Their participation demonstrates National General’s ongoing commitment to the continuing success of professional independent agents across the country.”

“National General is excited and honored to be part of an organization as critical to our industry as PIA and we expect our membership in The PIA Partnership will further the great work already accomplished for PIA members and National General agencies and brokerages,” says Rick Pierce, Senior Vice President of Independent Agent Development for National General Insurance.

Current PIA Partnership companies include:  Central Insurance Company; Encompass Insurance; Erie Insurance; Liberty Mutual Insurance; MetLife Auto & Home; National General Insurance; Nationwide Independent (formerly Harleysville Insurance);  Progressive Insurance; Selective Insurance Group; State Auto Insurance Companies;  The Hanover Insurance Group; The Hartford; and The Motorists Insurance Group.

Pennsylvania insurance agent Don Ruschak still goes to work every day at the agency he created in 1957. The 85-year-old who opened Ruschak Associates Insurance & Real Estate nearly 60 years ago still wakes up each morning at 6AM and heads into the office. Even though Ruschak turned over his business to his sons years ago, he says he just can’t keep away.

“I love helping people, especially those who are going through a difficult time,” Ruschak told the Herald-Standard, which covers local news in Ruschak’s Charleroi, Pennsylvania hometown. “That’s what attracted me to the insurance business initially, and that’s what keeps me going today.”

“Age doesn’t hold me back,” he said. “I still go out and inspect homes, and I help with appraisals. Working helps me to stay youthful. I tell other seniors to keep working as long as they can. The longer you work, the better you feel.”