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Perhaps it was the venue--sharing ideas in the presence of some of the most powerful insurance executives in the land--or perhaps it was the shock at the federal government's ineptitude at helping victims of Hurricane Katrina more than two years ago.

But the talk from a handful of insurance industry commissioners gathered at the 12th annual Joint Industry Forum hardly sounded like the kind of stuff you'd expect from public servants paid to regulate one of the most powerful industries in the United States.

"I'm a rabidly free market person," he said. "I don't think we should go to a government solution at all."

And how about Nonnie Burnes, insurance commissioner for Massachusetts? Despite seeing her initiatives at auto-insurance reform almost collapse over using credit scoring as a risk-rating tool, she said the issue was still "worth taking it on."

Don't forget Sandy Praeger, the Kansas insurance commissioner and this year's National Association of Insurance Commissioners president, who advocated for a change in the tax treatment for reserves put aside by carriers to pay future claims.

"We've begun to look into it," she said. "The 100 percent has nothing to do with the health of the company."

The reserving requirements, she said, need to be fixed.

"We can't afford CAT funds," said Louisiana Insurance Commissioner James Donelon, explaining why states should steer clear of Florida's strategy, which created a state-run catastrophe pool designed to reimburse homeowners but isn't charging enough premium for it to remain solvent.

"We've cooperated with private carriers as opposed to a CAT fund àla Florida," he said.

All agreed that the industry also suffered from the bad press it received after the disaster that befell New Orleans and the surrounding communities in the fall of 2005.

True--the industry might have been more astute in handling the claim of Mississippi Sen. Trent Lott, who sued State Farm in December 2006 after the carrier refused to pay for his destroyed home. Still, the vast majority of claims were settled within 30 to 60 days. Large commercial claims were settled every more quickly and quietly.

Praeger also praised the insurance industry's response to a severe tornado that hit Greensburg, Kan., last May.

"The response was quick and efficient, and we had very few complaints," she said.

Flooding in that state a month later, however, posed a different dilemma as much of the insured losses occurred after heavy rains, but few homeowners and businesses in the affected areas had NFIP policies.

"Many people don't understand that their homeowners insurance policies don't provide flood coverage, no matter how much we try to educate them to that fact," she said.

CYRIL TUOHY is managing editor of Risk & Insurance®.

January 21, 2008

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