PCI is the shorthand for the big annual convention of the Property-Casualty Insurers Association of America. I’ve always thought of it as the U.S. version of the Monte Carlo Rendez-Vous, a big meeting for the U.S. industry’s powerhouses to get together.
I only went to one of these meetings, and it was when the meeting was hosted by PCI’s forerunner, the National Association of Independent Insurers, so things may have changed a bit. There were a lot of high-powered events – I think Colin Powell spoke – but the gathering was mainly so all the players could talk shop dawn to dusk.
In some way, the official events seemed irrelevant. I distinctly remember having nothing to do and thinking the last thing I wanted to do was attend one of those high-powered events. It was an admission of your insignificance, that you were so tiny that you couldn’t command a meeting – kind of like going to a dinner party and only talking with your spouse.
So I don’t know how much credence to put in the theme of this year’s conference, Politics and Private Markets: The Uncertain Path to Prosperity, or in the remarks of David Sampson, CEO of PCI.
Sampson told PCI Reporter “there is so much political engagement in the marketplace right now, and so many policy uncertainties have been generated and inserted into the market, that basically everyone is staying on the sidelines.”
And I’ve heard that, too. I have trouble believing it. But it’s the theme of the conference, so I choose to extend my remarks:
I believe Sampson when he says he hears that political uncertainty is creating business uncertainty. However, I don’t think there is nearly as much uncertainty as some insist.
Take two examples Sampson cites – cap-and-trade legislation and health care reform.
Cap-and-trade was a proposal to limit the amount of greenhouse gases a company could produce. If a company produced less, it could sell the difference on the open market. This wouldn’t have caused too much uncertainty, as we’ve used cap-and-trade before, with sulfur emissions in the ’80s and ’90s.
Regardless, note the tense. It was a proposal. It died in the last Congress. The next Congress will be more conservative than this one, so there will be no cappin’ and no tradin’. Hence, no uncertainty.
And health care reform. From the POV of a big-company CEO, where is the uncertainty? Certain coverages are now mandated. Those are being priced into group policies now. Other mandates are being phased in over the next few years, and eventually most employee plans will be taxed. The schedule has been announced.
None of that is uncertain. It might not be the policy you want – it’s not what I’d prefer – but it’s happening, and fretting about a bad political break is not how an executive earns his pay.
And remember we’re talking about insurance executives here. Obamacare will grow the insurance market, requiring people to buy insurance and subsidizing individual coverage for millions of people. Insurance executives should be excited about that, particularly the p&c companies that write health coverages.
And the mandates raise premiums, creating additional underwriting profits and additional float for investment income. They also create incentives for new products, particularly in reinsurance. This is a great time for a bold leader in health insurance.
Now the executives I’ve talked to are, to put it mildly, not happy with Obama. But execs aren’t sitting on their hands. They never do. They didn’t reach their position by waiting until circumstances calmed, then acting.
Executives, at least the ones I’ve met, thrive on uncertainty and adversity. Every change presents new challenges and, being competitors, they want to conquer those challenges. And they want to do it before anyone else – it’s the race up Everest, every day.
I think some people hear executive complaints and blame those issues for economic malaise. The reasoning seems to be: The economy is stagnant. Executives don’t like X. Therefore, X is causing the stagnation.
But come on – does anyone believe that GDP is growing 6% a year in that alternative universe where Obamacare failed and cap-and-trade was never proposed?