Insurance Daily News

APCIA Launches Initiative to Cut Regulatory Costs for Small Carriers

Small and midsize insurance carriers are being burdened by high regulatory and corporate compliance costs, a challenge the American Property Casualty Insurance Association (APCIA) is addressing through a new initiative. David Bell, chair of the APCIA and CEO of ALPS Corp., described these companies as the backbone of the private insurance market. He noted that a recent APCIA study found these firms bear disproportionately higher compliance costs relative to their premiums compared to larger insurers.

Bell highlighted that scale significantly impacts how compliance affects expense ratios. A fixed regulatory cost does not have the same impact on large and small carriers. Eight out of every ten APCIA members have less than $2 billion in direct written premiums. While these companies may not be nationally famous, they insure farms, professionals, small businesses, homes, and communities across the country, providing depth, specialization, and resilience to the competitive marketplace.

Discussions with 20 small and medium carriers on the APCIA board confirmed the need to reduce what Bell termed a scale tax. This cost is incurred not because the company presents more risk, but because it has fewer premium dollars to spread largely fixed costs. Bell pointed to delays in approvals, filings, and licensing, as well as costly and inconsistently applied state exam formats, as factors that cost both money and opportunity. He warned that when the admitted market becomes slower, capital and product innovation migrate to the excess and surplus lines market, a structural rather than situational shift.

The proposed Small and Medium Sized Insurer Regulatory Cost Initiative (SMSIRCI) aims to pursue regulatory improvements and benefits for carriers. The goal is for these changes to positively affect expense ratios, which will hopefully trickle down to consumers. Bell acknowledged that the initiative’s acronym is less than catchy, joking that it sounds like a wifi router password. He expects scrutiny from policymakers as historical norms are challenged but believes the initiative can foster cooperation with state regulators to benefit consumers while maintaining a competitive marketplace.

Why it matters

This initiative targets the structural cost disadvantages faced by the majority of private insurers, which could influence future regulatory frameworks and market dynamics.

FAQ

What is the name of the new APCIA initiative?
The initiative is called the Small and Medium Sized Insurer Regulatory Cost Initiative, or SMSIRCI.

What percentage of APCIA members have less than $2 billion in direct written premiums?
Eight out of 10 members of the APCIA have less than $2 billion in direct written premiums.

Who is the chair of the APCIA?
David Bell, CEO of ALPS Corp., is the chair of the APCIA.

What term did David Bell use to describe the regulatory costs borne by small carriers?
Bell described the regulatory costs as a scale tax.

Source: Insurance Journal. See the original source for full details.