... when you want to change the world Engage with governments, but beware of bureaucracy says Henry Keeling
The insurance business has traditionally backed away from the cut and thrust of politics, but more recently has started to made its voice heard.
I have long thought that reinsurance makes a very good career for the curious, giving us legitimate reason to roam fields not directly related to the job of underwriting. A key part of my role as a chief executive is monitoring the economic tide and its underlying social and political currents. In fact, it is questionable whether an insurance executive can discharge his or her responsibilities without being something of a politician.
Judging from the coverage of this year's RIMS meeting in Philadelphia, it seems that some members of the insurance community are reviewing their interaction within the wider political sphere. Perhaps this is unavoidable, given the scrutiny of the sector by elected figures such as Eliot Spitzer - and I am pleased to see that Joe Plumeri, among others, had read my column on the need for self-regulation within the broking community!
If you can't beat 'em, join 'em
Although regulation of the industry figured prominently on the RIMS agenda, a political subtext could also be detected in much of the discussion, with issues such as the Kyoto Agreement and how it is likely to affect catastrophe lines, and how terrorism risk should be covered in the future.
We should not be surprised at this politicisation. With insurance such an integral part of people's lives in free market economies, it has always been prone to political involvement. In the past we have seen governments extending insurance safety nets where risks are of such magnitude or cost that coverage would be unviable in an open market.
When sufficient demand accrues it is sometimes possible to privatise these risks, often creating a grey area where governments do not cede absolute control to the private sector. While this can create some successful public/private initiatives, it also has the potential to set business and government at loggerheads.
In situations where an element of state protection and even control is necessary, there remains the thorny question of how much is enough. In other words, what is the appropriate level of governmental involvement in the sector?
Every government needs to consider when its responsibility to protect its citizens should over-ride free market economics, especially given the global reach of the insurance industry, where so much business is conducted outside a company's domicile. This can be a particularly delicate balancing act given that most governments are reluctant to create an environment that fails to attract capital or create jobs.
Theoretically the relationship should work optimally when government involvement is limited to extending protection to consumers, allowing the sector to run and price itself according to market economics. However, with this optimum remaining an elusive target, we often find ourselves involved in the political debate and even see election platforms that directly relate to the risks we underwrite.
Extending windstorm cover has become a pivotal electoral issue in certain states in the US, as has the terrorism protection pledge extended after 9/11. Likewise, employers' liability and workers' compensation in the UK and much of the EU are now political bargaining tools to woo the voters and business respectively.
To ensure that our interests are represented alongside those of the consumers we seek to insure, the sector has little choice but to participate actively in political discussion. We see this through the industry lobbying of politicians and even through active engagement in election campaigning.
The invitation from Capitol Hill to insurance community chief executives following 9/11 marked a seminal moment in the sector's relationship with governments. Since then the political platform of the industry has become increasingly public, and even directed at voters. Campaigning ahead of the UK general election saw a surprise contribution from the Association of British Insurers, which came out to advise voters to elect the party that would commit to flood defences and prudent building programmes. A sensible proposal, but hardly the snappiest of election slogans!
When you sup with the devil
While having a unified voice to ensure the fair protection of the sector is healthy in any democracy, it is dangerous to become too closely embroiled in the political maelstrom.
The industry must do all it can to resist overly complicated bureaucratic solutions that hamper the natural development of the sector. Where an administration is seen to overtly favour a particular sector or industry, or vice versa, consumers almost invariably suffer.
It is a difficult interaction to manage and one that must constantly adapt and evolve to keep pace with the type and scale of risks faced.
Industry forums like RIMS provide an opportunity for the sector to gather its collective thoughts on significant issues that affect the work we undertake. So, it would seem that all those heated bar-room conversations about the state of the world really do count as work!
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