W.R. Berkley, Westfield, Selective and Insurance Information Institute participate in annual CEO panel
WASHINGTON, D.C., April 19, 2011 – The economy was top of mind during Friday’s CEO panel at the Independent Insurance Agents & Brokers of America’s (IIABA the Big “I”) Legislative Conference & Convention.
The panel consisted of Bill Berkley, W.R. Berkley Corporation chairman of the board and CEO; Jim Clay, Westfield Insurance CEO & Westfield group leader; Dr. Bob Hartwig, CPCU, Insurance Information Institute president; and Greg Murphy, Selective Insurance Company of America chairman, president & CEO. Robert Rusbuldt, Big “I” president & CEO, moderated the discussion and question and answer session.
“The economy faces quite a few challenges, but even early last year I think I was one of the few people out there who said we were not going to end up in a second recession,” said Hartwig. “At the same time, [I said] growth was going to be unsatisfyingly sluggish and employment prospects would only improve and that continues to be the case today.”
While panelists generally agreed that the recent natural disasters in Japan wouldn’t necessarily have a direct effect on the economy and insurance market, it did reinforce the inter-connectedness of the world economies.
“One of the things that we learned in the 2008 recession was that all the world has a much greater cause than we thought,” said Berkley. “What happens in China, what happens in the U.S., what happens in Europe, is all interrelated. One of the things that you have to look at is, we have a long time with U.S.� big deficits, substantial deficit and we didn’t have inflation. We didn’t have inflation because of the benefits we got from low-cost production in Asia. We’re about to be stuck with inflation that’s going to come from those same places.”
The panelists discussed the potential impact of inflation on the economy in general and the insurance market in particular. Murphy said that people who predicted high inflation two years ago and adjusted their balance sheets accordingly got hurt badly because it never materialized. But inflation is coming-and it has two big impacts on the insurance industry.
“One, [inflation] has an immediate impact on our vested assets in terms of their values, although it does follow us in terms of higher interest rates down the road,” said Murphy. “On the liability side, we’re already seeing inflation. Medical inflation has been high. When you’re in an environment where it’s difficult to raise rates, inflation can be devastating to insurance companies because it effects your pricing immediately and it also effects your cost.”
The panelist indicated at the economic environment will have both short-term and long-term implications. “There’s no question that in the long-term� Medicare, Medicaid, Social Security � those have to be fixed,” said Clay. “In the short-term�.we’re dealing with a recession that is stubborn, we’re trying to overcome unemployment, the housing industry is not fixed yet. There’s no question that it impacts businesses anywhere.”
Other issues and industry challenges that came up during the panel discussion and question and answer session included: the direction of insurance market pricing, the future of National Flood Insurance Program (NFIP) and the quest to recruit talent to the insurance industry.
The morning event also included the state of the association address by Mike Miley, Big “I” chairman.
About Independent Insurance Agents & Brokers of America
Founded in 1896, the Big “I” is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance-property, casualty, life, health, employee benefit plans and retirement products. Web address: www.independentagent.com.