Commissioner Pickens: Iraq’s New Insurance Law On Hold for Now

In late October 2004, Insurance Journal had the opportunity to speak with Arkansas Insurance Commissioner Mike Pickens, a Republican, about the time he spent in Iraq earlier this year. Pickens, former president of the National Association of Insurance Commisioners, spent April through June working with a private contractor to the U.S. Agency for International Development, helping to develop insurance law as a first step toward rebuilding the country’s insurance system under an economic development initiative.

Following are excerpts from that interview, which can be heard online at www.insurancejournal.com.

Insurance Journal: Please talk a little about your experience in Iraq. What was it like?

Commissioner Pickens: Well, I can tell you, generally speaking, it’s a lot different than, I think, the picture that you see on television. Obviously I think the security situation has deteriorated somewhat since I left. But one thing that’s always bothered me a little bit is the picture we get on the news of all the bad things that are going on in Iraq–all of the bombings and things of that nature.

You never see … the courageous Iraqis that are involved in working with the coalition and their new government, the new interim government, to make things better in Iraq. They’re over there building schools and sewer systems and power stations and things of that nature. You never see any of the good news … you always see the bad news.

Thankfully I was involved in a project, as you said, to reconstruct the insurance industry. So I did get to see some of the good things that were going on. Obviously it’s a dangerous place. I was there from April through just about the end of June and things progressively … became more dangerous as time went on. But at the same time there are so many good things going on there. And unfortunately we here in America don’t seem to get any of the good news.

IJ: Were you concerned about your safety while you were there?

Pickens: I can honestly tell you that I really wasn’t. They tell you a little bit about what to expect before you go over there, but obviously you don’t really know what to expect. Once I got there though, you’re pretty much told what the security protocol is; you know what to do and what not to do. There’s a great feeling, honestly, of camaraderie–everybody takes care of each other. You don’t go to bed at night until you know that everybody’s in and everybody’s safe. People look out for one another and it’s really a good atmosphere–one that enhanced the feeling that we were doing some good things over there.

IJ: What exactly was your mission in going there? Were you actually establishing an insurance system or, as we said earlier, reconstructing one that was there before?

Pickens: Surprisingly enough they already had a fairly sophisticated insurance market. … From our standpoint, I mean an American standpoint, one of the negatives about their market is it was primarily dominated by the three state-owned insurance companies. They had a state-owned property and casualty company, a state-owned life and health company, and a state-owned reinsurance company. And their state-owned reinsurance company, IraqRe, happened to be one of the largest reinsurance companies in the Middle East.

In 1997 or ’98, I believe, they passed a law that allowed private insurance companies to be formed. The way their law was structured at the time it allowed, or set up, a monopoly or a strong position for the government-owned insurance companies. And the private insurance market that has grown up over there has pretty much been small, face-value life insurance, what we might call industrial or debit insurance in this country.

But otherwise they had a fairly sophisticated insurance market. They had a number of different types of products available, commercial products and auto insurance. Their auto insurance program actually was more of a government entitlement program. If you or I were Iraqi citizens and we owned an automobile, we had coverage through the property and casualty company. But that coverage was subsidized by a tax on petroleum. So, a much different system than we have in this country, but certainly not a capitalistic system because Iraq was a socialist dictatorship under Saddam Hussein. Everything was dominated by the government. … I guess we were pretty much starting from scratch as far as trying to teach people about capitalism and about how regulation works in a free market-type society.

IJ: Are there independent agents in Iraq? What was the distribution system like?

Pickens: That’s interesting. The distribution system had been damaged a great deal by the Iran-Iraq war. In fact over there, a lot of the executives of the insurance companies in general would sell insurance products. In other words an executive would be an insurance agent in many cases. When we asked why that was, we were told by the Iraqis we worked with that so many young people were killed during the eight or 10-year period of the Iran-Iraq war they were unable to recruit young people into the insurance business to act as insurance agents. I think it’s fair to say that the distribution system is rather limited and the agents over there would be pretty much all captive agents working for a specific company.

IJ: Who accompanied you? Were you working as part of a team?

Pickens: I was working as part of a fairly small team. The independent contractor that I was working with was working on what was called the Iraq Economic Governance Project, which involved taxation, banking, securities, setting up a stock market, and then insurance was thrown in just this year. So we actually were some of the first insurance advisors to go into the country.

Our primary job, No. 1, was to draw up an insurance law that was consistent with international best practices–a law that protected consumers but at the same time would allow for the economic development of the insurance industry. And then also to provide some training to the general managers or the presidents of the Iraqi insurance companies, and their insurance regulator, who was housed within the Ministry of Finance. Our actual insurance team consisted of myself as the regulatory advisor, one gentleman from the United Kingdom who is an insurance business person, and then we had a couple of translators, Arabic translators–Iraqis that worked with us. A fairly limited team, but as you can tell from my description the scope of our work was fairly limited as well.

IJ: Do you feel like you accomplished what you set out to do?

Pickens: I think we did. The Iraqi finance minister before we left endorsed our new insurance law and actually asked the Iraqi Governing Council at that time to pass the law. Because the transition occurred early–the transition from the Governing Council over to the interim government–and because of some other security issues and some other legislative priorities that were going on at the time, the law had not been passed at the time we left in late June. But we hope that at some point it will be passed.

And as you know they’re over there at this point, the interim government is, trying to draw up a constitution, and establish a procedure whereby they can hold elections in January of 2005. So, honestly, they’ve got some other priorities at this point but I do think that the work that we’ve done will provide a good baseline and a good starting point. And I’m hopeful that particularly since the Iraqi finance minister endorsed our law, at some point it will be passed.

IJ: Do you think there are obstacles, in terms of social attitudes or perhaps religious attitudes, to the establishment of a Western-type insurance system there?

Pickens: Not so much in Iraq. … I have done a little work in Egypt for the National Association of Insurance Commissioners. We had advised the Egyptian Insurance Supervisory Authority, EISA, back in 1999-2000 and there was a little resistance from some of the Islamic clergy about life insurance products because they felt it was almost against their religion, it was like gambling with God to take out a life insurance policy. But Iraq was a much more secular country and really is one of the more secular countries in the Middle East. You see a lot of younger people that are dressed more like Western Europeans or Americans. Their culture is a little more open, a little more secular than many of the Middle Eastern countries.
One of the primary obstacles to insurance over there is just the distrust of government in general and the fact that they have been repressed by the socialist dictatorship, Saddam Hussein’s government, for so long. There’s still a distrust of government and that spills over into insurance because … the insurance market has been dominated by government-owned insurers. There seemed to be among the general population distrust–really a lack of understanding, I would say, first–and then second, somewhat of a distrust because of the association of insurance with the government.

IJ: I know the security situation right now is not what we would hope for it to be. But down the road are you hopeful that there will be a level of legal responsibility established and effective methods to regulate insurance and make sure that insurance recoveries, for instance, are made in an effective manner?

Pickens: I think you’ve hit on the key issue … until there’s political stability in the country that provides for some physical security it will be difficult to move forward. I hope, and I’ve heard some Iraqis that we worked with and got to know well speculate, this is educated speculation … but they seem to think that sometime within the next three to five years things should settle down. And hopefully … if the Iraqis are able to hold free elections in January of 2005, there will be a government that the Iraqi people have some confidence in and that will bring about stability.
Frankly, I think they’re going to need the support of our military for a period of time and I’m certainly no expert there so I don’t know how long that’s going to take. But talking to my friends in Iraq these days … they want to see the U.S. elections over with quickly and they want to see their elections over with quickly. Because they feel like after that things may settle down some, and the security situation and the political situation will become more stable and allow for good things to happen in the country.

IJ: Do you have any plans to return to Iraq?

Pickens: A number of the contracts for work in Iraq were re-bid this summer and my name was included in the re-bid, as I understand it. I certainly would be willing to go back to Iraq; I think we have some unfinished business there. And again I’ve got friends over there. It’s amazing–you stay in a country two and a half, three months and meet people and you do feel like you have friends there. …
I certainly would be willing to go back to answer the question simply. … Again, there just has not been much going on there as far as the continuation of our project within the last three months or so because of the security situation.