Industry People Making Moves in 2003

As you will probably notice from this list, it is not scientific, preferential, etc. We retraced news coverage of this past year and tried to come to an agreement on who made headlines. We likely left off a few individuals, and we appreciate hearing from you if we did, or if you agree or disagree with our selections.

Order of appearance does not necessarily signify greater or lesser importance.

Louise “BeBe” Canter – Addressing changing realities in today’s industry.
Louise “BeBe” Canter is not an individual to shy away from a challenge.

The new president of the Indepen-dent Insurance Agents & Brokers of America (IIABA) has an-nounced that she is prepared to address the changing reality of independent agencies and brokerage firms and meet new industry challenges through such dynamic Big “I” programs as InVEST and the Agents Council for Technology (ACT).

In her inaugural address, Canter focused the spotlight on the programs and activities of the Big “I” and outlined her agenda for the upcoming year. Expressing her support for existing programs, she also announced the formation of a Small and Rural Agents Task Force, established to address the needs of those agents.

Canter, senior vice president of Patterson/Smith Associates in Falls Church, Va., became IIABA’s first female president and 99th overall during the closing general session of the association’s Convention & InfoXchange in Las Vegas this fall.

Her ascension to the presidency is the culmination of 25 years of involvement with IIABA. “Little did I anticipate when I answered the phone back in 1978 and was asked to attend a Young Agents organizational meeting that I would quickly become involved in our association through the Young Agents network,” Canter said. “I am a living example that our Young Agents system does work. I can personally testify that the rewards for Young Agents who stay involved in our association are life long friendships, business contacts, and a very successful career path.”

A woman who definitely is not afraid to roll up her sleeves and get down to business.

John Garamendi – To run or not to run?
California’s insurance commissioner has been termed by some to be a man who has his eyes on a bigger prize.

Whether true or not, Garamendi, in his second stint as the Golden State’s head of insurance, briefly threw his hat into the ring when more than 100 individuals ran for governor earlier this year. Arnold Schwarzenegger (see below) went on to win that post, replacing ousted Gray Davis.

After a brief flirtation with the office, Garamendi announced Aug. 9 he had dropped out of the race for governor. Garamendi bowed out under intense pressure from union leaders and fellow Democrats, the Los Angeles Times reported.

Garamendi, originally elected to the office in 1990, was sworn in as California’s third elected insurance commissioner in January of this year. It was only a few months later when the temperature on the state’s workers’ comp crisis rose.

In May, the State Compensation Insurance Fund filed suit against Garamendi and the California Department of Insurance (CDI). Allegations were that Garamendi had tried to illegally usurp control over the Fund.

California’s workers’ comp market reached yet another boiling point recently when the Fund filed suit against Garamendi and the CDI on May 28, alleging the Commissioner has attempted to illegally usurp control over the Fund. Garamendi indicated that he would continue to regulate the Fund as required by the law.

In September, Garamendi stressed the need for reform in the system and highlighted the needs of nonprofit agencies across California.

Garamendi had meetings with representatives from nonprofits in Los Angeles and San Francisco as part of his effort to bring about true reform of the $29 billion system. Garamendi told the Legislature’s Workers’ Compensation Conference Committee that $6.25 billion must be cut from the system in order to bring premiums back to the 2002 level.

Now with his eyes apparently focused on his current job, Garamendi may just yet find a solution to California’s biggest insurance challenge.

Robert Hartwig – Analyses and then some.
The senior vice president and economist for the Insurance Information Institute has done more than his fair share of analyzing in 2003. From the overall health of the P/C industry to the homeowners market to the impact of California’s wildfires, Robert Hartwig has worked more than his share of eight-hour days.

His latest challenge was addressing the impact of the devastating fires that blanketed Southern California in late October.

Hartwig noted that while formidable, the wildfires would fall generally within the range of catastrophic risk that insurers anticipate and built into insurance premiums for homeowners and businesses on the West Coast. Hartwig cautioned though, “While the industry has the capacity to pay these claims, the California wildfires substantiate what the industry has been seeing for several years. Homeowners insurance rates in many parts of the country have been increasing in large part because of the significant costs associated with these kinds of disasters. In fact, virtually every part of the country is now at risk for billion dollar disasters.”

Hartwig also reported this year on the overall health of the homeowners market. In his response to analysis that rapidly rising construction costs prices, home remodeling and increasingly expensive natural disasters are expected to push the cost of homeowners insurance up by 8 percent in 2004, Hartwig said part of the increase reflects choices more homeowners are making.

“People are taking advantage of record low interest rates and are moving into new homes or making additions to their existing homes in near record numbers. These upgrades and additions are pushing up insurance costs. However, reflecting the value of homeowners insurance, the cost of protecting the most important financial asset that American families have is less than one-half of one percent of the market value of the average existing home in the United States. People expect their premium rates to stay the same, but they don’t realize they have more house to insure.”

From homes to fires and sometimes both, Hartwig can be found to have an analysis on just about everything.

M. Diane Koken – On a roll in the Keystone State.
They say the third time is the charm. M. Diane Koken, first appointed in 1997, was confirmed for the third consecutive time earlier this year
as commissioner for Pennsylvania’s Insurance Department.

“Commissioner Koken’s commitment to the consumers of Pennsylvania is evident to every age group she serves,” Pennsylvania Governor Ed Rendell said. “Whether it’s increasing enrollment in the CHIP program by more than 200 percent since her first term in office, helping to unveil a new program called adultBasic for uninsured adults, or making Pennsylvania the first state in the country to offer qualified health plans for all federal health care tax-credit eligible citizens, her dedication to the well-being of Pennsylvanians is unmistakable.”

“Effective consumer protection is the hallmark of state insurance regulation. That’s why each year, on average, we respond to more than 23,000 written complaints,” Koken commented. “In addition, we recovered more than $10 million last year on behalf of consumers.”

Recovering more than $10 million on behalf of consumers will win you appreciation in any circles.

Gov. James McGreevey – Driven to make New Jersey work.
Those in the insurance industry may not be able to define just who James McGreevey is. Ask those, however, in New Jersey about the state of auto insurance, and likely, many can point to McGreevey as a driving force behind finding a solution to the problem.

Keeping his promise to change the way the Garden State regulates the auto insurance industry, McGreevey earlier this year welcomed the first new auto insurer to enter the New Jersey market since 1996.

The announcement came just two months after the Governor signed an auto insurance reform package meant to overhaul the State’s auto insurance system. The new insurer—Mercury General—would be hiring as many as 50 agents and planned to offer policies to drivers not renewed by State Farm Indemnity.

“There is no doubt that our reforms are making New Jersey an attractive place to do business again,” McGreevey said, “and the result means more choices for New Jersey drivers.”

New Jersey had more than 20 insurers leave the state in the last 10 years. Now it appears, thanks in part to McGreevey’s actions, New Jersey residents won’t be driven nuts by a lack of auto insurance.

Nick Prettejohn – At work for one of London’s best-known occupants.

Even those folks not familiar with insurance are likely to have heard of Lloyd’s of London.

In business for more than 300 years, Lloyd’s has seen its share of changes during 2003. One individual who is heavily involved in the day-to-day decisions for the company is CEO Nick Prettejohn.

Lloyd’s CEO noted late this year that, “We are determined to continue to streamline business processes in the Lloyd’s market, and to ensure that the terms of insurance contracts are agreed and clear before they come into force. Mandating the use of London Market Principle (LMP) slips is another significant step along this road. Our policyholders will benefit from greater contract clarity, which will help to ensure that the whole process of placing insurance and agreeing claims is quicker and more efficient. We have consulted widely so that the new approach is supported by market users and associations, reflecting their strong desire to improve market processes.” Lloyd’s announced that a comprehensive and consistent form of slip for writing risks will be mandated beginning in Jan. 2004.

Reform has been on Prettejohn’s mind, as noted at the 102nd Insurance and Financial Services Conference of the U.K.’s Chartered Insurance Institute in London. During that meeting, Prettejohn stressed the need for the industry to reform itself (See IJ Web site Sept. 19). He made clear both the need to overcome the cycle of “peaks and troughs” that dominate the history of insurance and the need to utilize technology to modernize how the industry operates in order to control costs.

At a press conference following his speech, Prettejohn even voiced the heretical notion that in order to control the cycle it might be necessary to simply maintain Lloyd’s present capacity (around £20 billion/ $31.8 billion) or even reduce it. “I wouldn’t be disappointed [if capacity stays the same], and we avoid losses.”

Who would be upset at avoiding losses?

Arnold Schwarzenegger – Looking to terminate the workers’ comp crisis.

California Governor Arnold Schwarzenegger probably never sold an insurance policy in his life. Maybe he doesn’t even know what is included in his own. The actor turned politician, however, has had to quickly educate himself on California’s biggest insurance crisis in years, workers’ compensation.

According to the Association of California Insurance Companies (ACIC), Schwarzenegger has exhibited strong leadership in addressing workers’ comp issues by calling the California Legislature into special session to enact further cost-saving reforms to the state’s workers’ comp system.

Reforms approved by the Legislature and signed into law in early 2003 represent important first steps in revitalizing California’s beleaguered system, according to ACIC President Sam Sorich.

Sorich followed that up by noting, “However, we believe—as does the governor—that much more needs to be done to reform the state’s workers’ compensation system and fully stabilize the market place.”

It will take strong leadership and bipartisan support to move California out of crisis mode. Only time will tell if Schwarzenegger can terminate this crisis.

Michael Segal – Back for an encore.
Whether it is an honor or not, Michael Segal is back in IJ’s Top 10 newsmakers after making an appearance in 2002.

This year kept Segal on his toes, as did 2002. In late summer of this year, Mesirow Insurance Services Inc. announced it had come to an agreement with Near North Insurance Brokerage that would allow it to assume the accounts of Near North’s Chicago office, along with hiring a number of the Chicago-based insurance services firm’s employees.

The sale of Near North became an item of interest to the industry when Segal, the founder and former CEO of the company, fell under federal indictment for fraud and racketeering in relation to the alleged embezzlement of more than $20 million from the brokerage’s premium trust fund. It appears the third time (Mesirow) was the charm as prior agreements for the sale of the brokerage to Frontenac Co. and Hub International Ltd. collapsed shortly after being made public. Both Segal and the company were under indictment before the sale went through, no doubt having an impact on previous attempted sales.

Segal’s trial, first scheduled for March and then June, was postponed due to new charges against Near North itself and against Segal’s accountant.

In an exclusive Jan. 2004 interview with Insurance Journal Midwest Editor Kevin O’Reilly, Segal will tell his side of the story.

Greg Shepard – Have I got a deal for you!
Ohio-based State Auto Financial Corp.’s top individual shareholder wants to find a price that is right.

Investor Greg Shepard has come to the company several times this year in his efforts to take over the property and casualty insurer. When Shepard went to State Auto last summer, with an offer of about $316 million, the firm’s majority owner gave the proposal a frosty response.

Shepard, who owns about 5 percent of State Auto’s shares, offered to pay $29 for each of the company’s 10.9 million shares, up from a previous offer of $27.50 per share. He also reportedly would exchange his 2 million common shares for $58 million of Class B preferred stock.

Shepard said his proposal is conditioned on his nominees representing a majority of the boards of State Auto, State Automobile Mutual—which owns about two-thirds of State Auto’s shares—and other affiliates and subsidiaries.

As of late September, Shepard was still playing the waiting game.

The board of directors of State Auto recommended that its shareholders reject a cash tender offer from Shepard to obtain 8 million shares at $32 each, but Shepard isn’t giving up. In a statement, Shepard was quoted as saying, “Despite the fact that the State Auto Financial Board has rejected our cash tender offer and refuses to negotiate with us, we are committed to this transaction.”

If only Bob Barker had this much fun on the Price is Right.

Robert Wooley – Keeping things moving down on the bayou.
With three previous Louisiana insurance commissioners having done jail time, Robert Wooley is looking to end that trend.

In November, the commissioner got the full-time position after winning election over Republican challenger Dan Kyle. According to the New Orleans Times-Picayune, Wooley won 58 percent of the votes to Kyle’s 42 percent.

One area that Wooley took leadership on during 2003 was state regulation. Wooley was joined by National Association of Insurance Commissioners (NAIC) President and Arkansas Commissioner of Insurance Mike Pickens in August at a press conference to kick off Louisiana’s ASSURE program.

ASSURE, Alliance for Sound State Uniform Regulatory Efficiency, is a state-level grassroots effort, initiated by the NAIC at Commissioner Wooley’s urging, to counteract federal legislation aimed at usurping states’ rights to regulate insurance by creating a centralized federal bureau of insurance.

According to Wooley, “Takeover of insurance regulation by the fed would cost Louisiana more than $200 million dollars yearly, rob consumers of their right to local protection and bog efficient state government claims and regulatory processes in the mire of federal bureaucracy.”

With Louisiana’s checkered past when it comes to commissioners, Wooley is no doubt hoping that he can go about doing his job with as little limelight as possible.

Editor’s Note: Cynthia Beisiegel, Charles Boyle, Stephanie Jones and Kevin O’Reilly contributed to this story. To comment, e-mail dthomas@insurancejournal.com.

Topics California Auto Agencies Legislation Workers' Compensation Wildfire Excess Surplus Louisiana New Jersey Pennsylvania Homeowners Market London Lloyd's