In the Thick of National Crisis: IJ Talks with IIAA CEO Rusbuldt
As the nation was reeling from tragedy, Robert A. Rusbuldt, CEO of the Independent Insurance Agents of America (IIAA), was moving ahead with other industry representatives to ensure that the important role of independent agents was recognized and secure. Rusbuldt took a minute to tell IJ about some of the key impacts on the industry.
A meeting with the President
On Sept. 21, Rusbuldt and other industry leaders met with President Bush in the Oval Office to assess the status of the industry following the events of Sept. 11. What does one talk about with the President of the United States on such an important occasion?
“The first thing that he talked about for 15 minutes was the war on terrorism and it really didn’t have a lot to do with insurance, but remember this is the day after his big address to Congress and to the nation,” Rusbuldt said. “Then we talked about the state of the economy, airline industry and insurance issues. We talked about getting claims paid in a timely manner, issues like verification of death, death certificates, lost property, etc. Then we talked about the war exclusion issue. We told the President that there was no indication from any insurance company that they were going to invoke the war exclusion provision, and the President thanked us for that.”
The representatives also assured the President that the industry is well-capitalized with more than $3 trillion in assets that will be called on to pay claims.
Next on the agenda was the specter of terrorism and coverage of terrorist acts. “We told the President it clearly was an issue that had to be addressed going forward; that insurance companies were going to have some major problems underwriting insurance for airlines; for instance, for terrorist acts. It’s not like a natural disaster in which you can go back hundreds of years and track the frequency of hurricanes in specific areas…This is a manmade disaster.”
Rusbuldt said they also discussed with the President the model used by the U.K.—pooling reinsurance together to provide a “federal backstop”—to ensure that terrorist coverage is available for industries like the airline industry.
How knowledgeable is our President on insurance issues?
“[Bush] had a good understanding of the insurance industry, he asked about the bond market, the ability of companies to pay these claims, whether certain assets or investments would have to be tapped, liquidated, those sorts of things. He asked some very good questions and seemed very well-informed on the insurance industry,” Rusbuldt said.
A war on the horizon
“The president emphasized that this will be a different kind of war,” Rusbuldt said. “He said point-blank there weren’t going to be a lot of ‘CNN moments,’ big bombings on TV—a lot of it would be covert and in fact, the American public wouldn’t know all the time when we had major successes. So it’s a different kind of war, and if you don’t know about covert activity that’s taking place, it’s not going to affect anybody because nobody knows about it.”
Going forward, how can insurers expect to see their day-to-day business affected?
“Most of the insurance companies want to either exclude terrorist acts from property coverage and things like airline coverage and most commercial lines policies; or they want to have it covered but with a higher rate or with a federal backstop on reinsurance—some way that they can afford to include it,” Rusbuldt said.
“So it will clearly affect independent agents and their clients regarding coverage in their commercial lines policies for acts of terror. And that’s being worked on right now legislatively.”
A pointed letter
On Sept. 17, key congressional leaders from the U.S. House of Representatives Committee on Financial Services sent a letter to National Association of Insurance Commissioners (NAIC) President Kathleen Sebelius. The letter emphasized the importance of “ensuring that the human needs of the crisis are quickly addressed, that all contractual obligations are fulfilled in a timely manner, and that no company undercuts the entire system by trying to evade its responsibilities.”
The letter was answered in no uncertain terms by insurance groups such as NAMIC, who replied in part: “Insurance employees are patriotic Americans and, after firefighters and police, are generally the first people to respond in a crisis, as they have been in this tragedy.”
From Rusbuldt’s point of view, “Congress is looking at the industry closely to make sure that we meet our obligations, and they want to make sure that claims are being paid and that they’re being paid in a timely manner. On the other hand, I think Congress and the regulators understand that unfortunately, there are people who look at these times as a way to get something that doesn’t belong to them.”
One of the areas that both regulators and Congress will be watching carefully is foreign reinsurance, according to Rusbuldt. The scrutiny will ensure “that [foreign reinsurers] are paying their reinsurance claims and that there’s not any kind of ripple effect from the reinsurers to the primary insurers to the policyholders.”
The coming months will bring into focus the specific issues at play for every segment of the industry. The good news is that independent agents, brokers and insurance companies are ready to accept the challenge.
“I think the industry has never been more committed to making people whole, or as whole as they possibly can be made by paying claims in a timely manner,” Rusbuldt concluded.