Brokers List Legislative Priorities

Crop and flood insurance, and a host of health-care related concerns are top of mind for brokerage organizations.

By: Steve Yahn | April 2, 2015

‘Tis the season for major insurance agent and broker organizations to formalize their legislative agendas for the coming year.

Holding the line on an Obama administration proposal that would reduce crop insurance premium subsidiaries by $16 billion over the next 10 years is a top priority for these organizations.

John Prible, vice president of federal government affairs, Independent Insurance Agents & Brokers of America

“Individual agents are the primary distribution force for the federal crop insurance program,” said John Prible, Washington, D.C.-based vice president of federal government affairs for the Independent Insurance Agents & Brokers of America (IIABA). “So we’re intimately involved in that program.”

Members of the National Association of Professional Insurance Agents (PIA) underscored at its annual federal legislative summit held in late March that it, too, vigorously opposed the Obama administration proposal for crop insurance cuts.

PIA also said it supports a modernized state-based insurance system and opposes any federal regulation or international standards that would destabilize or supplant state-based insurance regulations.

PIA is also closely monitoring activities of the Federal Insurance Office (FIO), including actions related to producer licensing and international agreements, to ensure that the FIO does not exceed its limited authority.

Jon Gentile, PIA’s director of federal affairs, also noted that his organization has endorsed the Access to Professional Health Insurance Advisors Act of 2015, which clarifies that producer compensation will not be considered as part of medical loss ratio (MLR) calculations under the Affordable Care Act.

PIA said independent agents play a critical role in the sale and servicing of health insurance.

Protecting Assets

Prible said the IIABA is going to the Hill to support the recently introduced Policyholder Protection Act.

“This bill is a tweak to Dodd-Frank that would allow state regulators to wall off and protect insurance company assets for insurance consumers and not have these assets used to bail out non-insurance related failures,” said Prible.

“For example, if a financial institution has both a bank and an insurance company, we want to make sure that if the bank fails it’s not going to bring down the insurance company.

“We’re also going to be talking about the Labor Department fiduciary standards issue, which we’re becoming very engaged in,” he said. “We frankly think the Securities and Exchange Commission should act first on instilling a fiduciary standard and that the Labor Department should take a back seat.”

Flood Insurance

Another big issue Prible’s organization is working on is the national flood insurance program. “The program expires on Sept. 30, 2017, but we’re going to be on the Hill reminding them that that’s not that far away,” he said.

Several insurance agent and brokers organization are lobbying to incentivize independent agents and brokers to sell flood insurance, which at present is largely a federal program.

“Right now,” said Joel Wood, senior vice president for government affairs at the Washington, D.C.-based Council of Insurance Agents and Brokers (CIAB), “there is very, very little private flood insurance because everything is written through the federal government.

“Rep. Dennis Ross (R-Fla.) has legislation in the House Financial Service Committee that would incentivize private carriers in the flood insurance program,” he said.

Threat to Employer Benefits

Joel Wood, senior vice president for government affairs, Council of Insurance Agents and Brokers

Wood noted that CIAB’s top legislative issue right now is on the benefits side — in opposing the so-called Cadillac tax, a provision of the ACA.

Starting in 2018, benefit plans that cost more than $10,200 for individuals and $27,500 for families will be taxed with a 40 per cent excise tax.

“It’s not indexed to medical inflation and so over time will affect most plans,” Wood said. “While it’s aimed at raising many billions of dollars, we believe that’s bogus as I’ve yet to hear of a single employer who is going to pay the tax. Instead they’ll reduce their benefits. Goodbye flexible spending accounts and medical savings accounts, for example.

“We believe the Cadillac tax may present the greatest long-term threat to employer-sponsored health care.”

Wellness Initiatives

On another ACA front, CIAB and others are fighting an Equal Employment Opportunity Commission lawsuit that claims Honeywell’s expansive wellness program is inherently discriminatory.

“This threatens the sanctity of all wellness plans because the argument is that you’re discriminating against smokers and obese people, so everything is sort of on hold with people moving ahead on wellness plans,” said Wood.

“There is a lot of uncertainty caused by the EEOC. So we are working with others on legislation that has been introduced in the House and the Senate that would put the teeth back into the wellness provision and essentially render moot the EEOC lawsuit against Honeywell,” he said.

Steve Yahn was a freelance writer based in New York. He had more than 40 years of financial reporting and editing experience. Comments can be directed to [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.

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