Insurers must fight to preserve ‘sanctity’ of contracts: APCIA CEO Sampson

The “sanctity” of insurance contracts and the principles of risk-based pricing continue to be threatened by regulatory and legislative initiatives in the US and it must be the industry’s priority to repel such challenges amid an increasingly challenging wider landscape for insurers.

That is the message from David Sampson, chief executive of the American Property Casualty Insurance Association (APCIA), speaking ahead of the organisation’s annual conference, taking place in Denver, Colorado, this week. He said that fighting such initiatives from advocacy and legal perspectives is top of APCIA’s agenda.

“That is top of our agenda and, looking forward to 2022, I expect this to remain a priority for us and our members,” Sampson said.

“We continue to experience a number of threats to the sanctity of insurance contracts as well as attempts to expand coverage and attacks on the use of risk-based pricing and actuarial-based rules. This remains a major concern.”

One of the most concerning threats, which the APCIA has lobbied vigorously against, has been in the form of some states moving to force insurers to retroactively cover certain types of claims, notably workers’ compensation, despite their clearly not being covered in the original policy, he added.

Another concern is the trend of some US states moving to ban the use of some types of risk-based pricing on the basis that its use is unfair or discriminatory to certain socioeconomic groups. Sampson said most of these techniques are actuarially sound and banning their use would present challenges for the insurance industry.

“A lot of these trends seem to have been exacerbated by the COVID-19 pandemic but we see these as fundamental pillars of the industry. Risk-based pricing, for example, is a foundation of the industry. We must resist these attacks on its very nature,” he declared.

While these issues are top of the industry’s agenda, Sampson is keen to highlight the many other challenges insurers are grappling with. He notes that 2021 could well rival 2020 for insured losses, a year that broke many records with US insurers paying out $74 billion in insured losses.

“When you look at the many cat events we have seen this year, including the freeze in Texas and Hurricane Ida, 2021 could rival that,” he said.

“We are seeing continued social inflation, law suit abuse in states such as Florida, increased severity and frequency of auto claims and the continued uncertainty and increased losses resulting from climate change.

“On top of this, you have the ever-growing challenges of cyber and now ransomware demands. All this is having a big impact on loss costs. And those are just the things we know about; there are always other things not yet on the radar,” he went on.

A vital role

Despite these many and varied challenges, the insurance industry has performed admirably in recent years, supporting the US economy and its clients in crucial ways. Sampson notes that in 2020, the industry paid out $447 billion in claims. To highlight the vital role the industry plays, the APCIA will be launching a new campaign at this year’s conference designed to highlight this fact.

The campaign shares the name of the conference: “Insuring what matters most”.

“This encapsulates what the industry is all about. Our products are vital for protecting individuals, families and businesses—and everything they care about. The campaign will highlight our record of delivering on promises to policyholders and our overall contribution to the economy and its resilience,” he explained.

He notes that insurers protect some 221 million vehicles and 85 million homes, and has some $292 billion invested in bonds, the proceeds of many of which will be used to improve local communities.

This theme will also pervade the conference’s agenda. Sampson notes that the event will deliver a host of top speakers who will cover topics from climate change and cyber threats to coverage disputes.

“We have some great speakers and great content this year. Attendees will learn a lot and have plenty to take back to their boards in terms of useful information they can use,” he said.

He also notes how pleased he is that the event can go ahead in a physical form. Last year the event was held virtually due to COVID-19. While numbers are down, he said that APCIA has exceeded its aim of getting attendance to 50 percent of 2019 levels—it will instead exceed 60 percent, despite many overseas visitors being unable to attend due to ongoing border restrictions.

“There is no substitute for being together in person. As well as allowing insurers to meet their peers, it is very important to reinsurers and brokers that face-to-face meetings can take place. This is an important meeting for the renewals.

“We will be using many safety protocols including proof of COVID-19 vaccination, and we hope the event will feel as close to normal as possible. It is good to be back.”