Insurance discounts eyed for security

The Department of Homeland Security is considering requiring insurers to offer discounts to businesses that meet government security standards.

The insurance industry is warning against such an idea, saying government regulation would drive up prices for policies.

Although Homeland Security officials say they are discussing the idea, no proposal has been made.

“It’s premature for the Department of Homeland Security to discuss this issue at this time,” said spokeswoman Valerie Smith. “We will have policy discussions and briefings in the upcoming months.”

Meetings will be scheduled “with members of industry to understand their concerns,” Miss Smith said.

Any effort to require insurers to offer discounts for counterterrorism security would have the effect of “making the government a partner in the relationships between insurers and their clients,” said Carl Parks, senior vice president for the Property Casualty Insurers Association of America.

He also said the idea of discounts for better security “simply does not work and is not appealing to either commercial insurance consumers or insurance companies.”

Insurance regulation to improve security appears to be an attempt to reduce the burden on government to protect critical industries, such as utilities and chemical plants.

Insurers say more government regulation would increase the cost of doing business by interfering with free-market principles of supply and demand.

They also are concerned about lawsuits from customers who might disagree if they do not qualify for discounts.

Frank J. Cilluffo, director of the George Washington University Homeland Security Policy Institute, said tax credits would be a better incentive than government regulations.

“We want to reward those that are being entrepreneurial,” Mr. Cilluffo said. “Otherwise, you got the trial lawyers driving it and not the experts.”

Catherine England, a Marymount University economics professor, said government intervention in influencing insurance rates is unnecessary.

“The insurance industry already has every incentive to identify and reward measures undertaken by commercial customers to reduce terrorist threats,” she said. “Their money is on the line.”

The Homeland Security idea coincides with hearings in Congress on how to reauthorize the Terrorism Risk Insurance Act (TRIA), a law enacted in 2002 that requires the federal government to pay for catastrophic losses from terrorism.

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