Stirring the alphabet soup

Risk & Insurance, August, 2004 by Thomas J. Slattery

The latest Fact Book out of the Insurance Information Institute lists 10 pages of "Insurance and Related Service Organizations," most of them trade associations. Some people say there are too many trade groups, and that they do more harm than good. Do risk professionals have the time and do their organizations have the resources to support them? One industry veteran delves into these questions and more.

It's probably safe to say that E Pluribus Unum is one motto that won't soon, if ever, apply to the swollen ranks of trade groups on the American risk transfer scene. America, they say, smiles on diversity and opportunity and this we get in spades in "the trades"--diversity both real and apparent, and ample, often lucrative employment opportunities for lobbyists, certified association executives and out-of-work politicos, to name but a few.

Granted, their numbers dwindled by one with the recent blockbuster marriage of the National Association of Independent Insurers (NAII) and the Alliance of American Insurers (AAI), which created the Property-Casualty Insurance Association of America (PCI). Even so, the alphabet soup of industry associations remains the bane of overwhelmed regulators, befuddled legislators and confused communicators of varying stripes, neophyte trade press writers among them.

The latest Fact Book out of the Insurance Information Institute lists a full 10 pages of "Insurance and Related Service Organizations," most of them trade associations. On the national scene alone, there are still three major organizations advancing company interests, three for producers, another three for insurance consumers, and assorted groups for women, reinsurers, captives, risk retention groups, insurance regulators and legislators, adjusters and techies.

A number of them have state and local affiliates. Are they all necessary? Are there too many? Do they do more harm than good? What's better, unity or (presumed) diversity? One voice or many? Are the differences among them meaningful? Are those differences real, perceived or anachronistic? Do risk professionals have the time and do their organizations have the resources to support them?

Questions like these are "evergreens," popping up like clockwork when a deal like the one that gave birth to PCI goes down.

By way of background, a good portion of American insurance history was occupied with the fierce competition between stock companies and mutual companies. The infighting amounted to a virtual blood feud not unlike the one between the Hatfields and the McCoys. The feuding divided the producer ranks as well.

On the company side, the "stocks" gathered under the aegis of the American Insurance Association, the "mutuals" under the twin banners of the American Mutual Insurance Alliance and the National Association of Mutual Insurance Companies.

On the distribution side, the lines were just as clear: the National Association of Insurance Agents representing the stocks and the National Association of Mutual Insurance Agents representing the mutuals.

Post World War II, the two sides found common cause, if not a cessation of hostilities, when a new business model emerged to successfully challenge the hallowed "American Agency System," direct writing companies like Allstate and State Farm, which employed "captive agents" and focused on consumer advertising and automation. This new force came together to form its own trade association, the NAII.

Over time, these distinctions all but dissolved. The NAII long ago cut loose from its origins as a trade association of the direct writing companies. AMIA long ago cut loose from its own defining point as an association of "mutual" insurance companies and became the Alliance of American Insurers. Both widened their embraces, reaching out to all companies and to ever-new distribution channels. But even though these once rock-hard differences evaporated, it took some 20 years for the two to come together. Can NAMIC and the AIA be far behind? History, if not logic, argues it will be decades, if ever, that there will be a single voice on the company side.

AGENTS, BROKERS JUST AS FRACTIOUS

It's no different among producers. NAMIA dropped the "mutual" from its name and became the Professional Insurance Agents of America, thereby widening its own minimized embrace. But despite serious "intersecting circles of interest," in the words of one insider, repeated attempts over the years to merge the PIA with the Independent Insurance Agents & Brokers of America (the former NAIA) have come to naught. Apparent animosity between the latter and the Council of Insurance Agents & Brokers, which itself resulted from the merger of two associations of high-end producers, makes any merger between the two seem all but unreachable at this point.

And so it goes, all the more complicated by the advent of the alternative markets and the plethora of trade associations it has given rise to.

But are they so different in the end?

"They all look the same in many ways," says one longtime insurance executive, who adds that members would make it all better if they'd "set aside their political issues and egos."