Press Release - OCTOBER 16, 2009

BestWeek: Under Reforms, Little Rate Regulation and New Customers May Mean Health for Insurers


CONTACTS:
 
Caroline Saucer
(908) 439-2200, ext. 5774

caroline.saucer@ambest.com



FOR IMMEDIATE RELEASE

OLDWICK, N.J. - OCTOBER 16, 2009
With virtually no limits on what they could charge in premiums, coupled with millions of new customers to gain, the U.S. health insurance industry's financial future certainly isn't in critical condition, according to BestWeek U.S./Canada.

This is boosted by the main goal of health-reform legislation being expanded coverage but not necessarily lowering medical costs, experts said. The bills do little to lower costs because they're not addressing what's driving them, including defensive medicine and the fact that nobody can define quality care, said Debra A. Smith, a physician and an economist who has worked in public health, health care financing and administration and insurance.

In BestWeek Europe, insurance markets worldwide emerged from the recent global economic crisis in reasonably good shape, according to Roger Sellek, managing director of global financial services at A.M. Best Co. Speaking at the opening of the A.M. Best's 2009 Review & Preview—Europe conference in London, Sellek said the crisis had impacted the market, especially in terms of falling investment returns.

And in BestWeek U.S./Canada, contingent commissions never really died. Even while the big four brokers stopped accepting them, many smaller, independent agencies continued to rely on them for a significant source of revenue.

Fast forward to this July, when Illinois gave Arthur J. Gallagher the green light to accept contingent commissions again on retail brokerage business effective Oct. 1. While contingent commissions were lumped into the bid-rigging scandal, they are a whole different animal. While no one can claim that bid rigging is anything less than a crime, contingent commissions — often offered by carriers to reward brokers for bringing in profitable business — are not only legal, but a time-honored tradition.

BestWeek is published by A.M. Best Co. for insurance professionals. To subscribe, visit http://www.ambest.com/sales/BestWeek.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.