Meanwhile, brokers and agents will continue to be the bearers of bad news as premium rates are expected to continue their upward climb, said Coletta I. Kemper, vice president of industry affairs for the Council of Insurance Agents and Brokers, based in Washington, D.C.

Rates are not expected to increase as dramatically as they did in 2002, she said, but the challenge remains in not just providing a policy but spending the time with clients to find ways to reduce their risk exposure and mitigating the premium cost.

Seeking alternatives to the traditional market is one answer, but that means a long-term commitment for the client. However, captives or other self-insurance options would be a solution that would at least “eliminate the dips and valleys” of the market cycle, she noted.

“Brokers have worked some long, hard hours this year, and next year will probably not be as bad,” observed Ms. Kemper. “Thats assuming there are no major catastrophes.”

Independent agents are scrambling to find homeowners coverage for clients in Texas, Florida and other states where some insurers have stopped writing. And there does not appear to be relief anytime soon in those problem markets, according to Robert A. Rusbuldt, chief executive officer of the Independent Insurance Agents & Brokers of America, based in Alexandria, Va.

In an effort to improve their underwriting, some insurers will not write homeowners policies unless they have the customers auto policy as well, points out Gary W. Eberhart, executive vice president of the National Association of Professional Insurance Agents in Alexandria, Va. Until business improves in terms of investment returns and underwriting profits, agents will lose markets, he said, and placement will continue to be a big problem.

“I dont know what the answer is,” Mr. Eberhart confessed.

What worries Joel Wood, CIABs senior vice president of government affairs, is that this hard market could result in a deep rift between the property-casualty industry and clients in a similar way to what has happened with health insurers.

“What happened is the medical community and insurers became bitter enemies,” observed Mr. Wood. “I worry some of the same things could be in play in the p-c arena.” He added that “the challenge for 2003 is to provide markets for members and their clients and do it in an affordable and available manner.”

Litigation reform is acknowledged to be crucial to helping to mitigate the spiraling upward premium trend of the hard market. Without reform, jury awards will continue to spiral out of control, straining the bottom lines of insurance companies and limiting the availability and affordability of markets, agent groups say.

With the Republicans controlling both houses of Congress, there is a “solid shot” at asbestos litigation reform, said Mr. Woods. With a President who has a track record of producing class-action and medical malpractice litigation reform in Texas, “we have a real opportunities there that probably didnt exist before the election,” he added.

IIABA's Mr. Rusbuldt stressed that “the whole issue of tort reform, whether it is medical malpractice, asbestos, or class-action reform in general, is an all-important issue to agents because it is affecting their markets. If you dont have a company writing business in those lines [because of high jury awards and litigation costs], obviously you have clients who are in real need.”

All of those interviewed felt agent licensing on a national scale would continue to be an important issue, but differed on what the solution is and how far the debate would get in 2003.

Mr. Rusbuldt said that as long as there are major insurance markets such as California and New York not accepting licensing reciprocity, the system devised under Gramm-Leach-Bliley would not live up to expectations.

PIA's Mr. Eberhart said he thought it was equally important that work be done to iron out the licensing issue, and have uniformity across the board pushed by the National Association of Insurance Commissioners. However, he added that he did not think licensing would be high up on Congress agenda for 2003.

Mr. Wood noted that the industry is “a long way” from 100 percent reciprocity. He said the goal of CIAB, which proposed a national licensing system as part of GLB, is for a dual state and federal chartering system. But if that cannot be developed, then a National Association of Registered Agents and Brokers should be created to assure 50-state uniformity, he added.

Licensing is an issue of efficiency, stressed CIAB's Ms. Kemper, who said that as the insurance industry evolves in the global market, it becomes increasingly necessary to be able to provide consistent service across jurisdictional boundaries.

“The global insurance market has just taken off, and you really cant operate in a 50-state system for the commercial side any longer,” Ms. Kemper said. “You need a federal system, not only for licensing, but also product approval because those sorts of issues affect our members' ability to get the business done.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 6, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.