The following article was taken from the June 2009 issue of Surplus Line Reporter & Insurance News

McKnight, president of BancorpSouth Insurance Services, describes CIAB as a member driven association which focuses on providing services to members and taking positions on issues that affect members’ businesses.  The association, he said, is always “trying to develop more services.”

McKnight was executive vice president of Wright and Percy Insurance, Louisiana’s oldest and largest insurance agency, from 1982 to 1994, and president and CEO of Wright and Percy Insurance from 1994 to 2005.  BancorpSouth acquired Wright and Percy in 2003.  McKnight has headed BancorpSouth Insurance Services since 2005.  BancorpSouth, headquartered in Mississippi, operates 26 agencies in eight states, including six in Texas and five in Louisiana.

Since President Barak Obama is pushing for changes in the nation’s health care system, and congressmen are debating what those changes will be, the health care system is front and center for CIAB members, just as it is for members of several other insurance industry trade groups.

When McKnight was interviewed, Sen. Edward Kennedy (D-Mass.) had just introduced his health care reform legislation, the Affordable Health Choices Act, which leaves insurance producers out of the process.

McKnight is attempting to understand why the value of the broker has been left out of the health care debate.  “It seems there’s a lack of understanding, so part of the challenge is finding out where we fit,” he said.

Several producers groups, including CIAB, the Independent Insurance Agents and Brokers of America, National Association of Health Underwriters and the National Association of Insurance and Financial Advisors announced June 9 that they plan to host a joint health care reform Capitol Hill fly-in July 14-15.  Those groups want to send a message to Congress about preserved the private deliver of health insurance and to voice opposition to the creation of a public plan that would compete against private insurance companies in health insurance marketplace.

Not sure whether or not he will attend, McKnight sees the trip to Washington as a double-edged sword.  “We all have to demonstrate our value,” he said, but he worries that somewhere along the line it becomes “storming the capitol with pitch forks.”

He’s also concerned that agents and brokers could be seen as just protecting their space, instead of explaining their role as providing a service and value to their customers.

McKnight believes a single payer system (translate government health care system) is not a fait accompli and pointed to an article which appeared in the Wall Street Journal in late May which uses the 1998 “Gnomes” episode of the “South Park” television program to explain the logic of the Obama administration’s policy proposals.

As the author of the WSJ article, Bret Stephens, explains the episode, the children of South Park, Colo., get a lesion in how not to run an enterprise from mysterious little men who go about stealing undergarments from the unsuspecting and collecting them in a huge underground storehouse.

The gnomes explain their big idea in three phases.  Phase one is collecting the underpants; phase two is a question mark, and phase three is profit.

When it comes to Obama’s $1.2 trillion health care reform, Stephens explains, phase one is “scrounge around for about $60 billion in new ‘sin tax’ revenue.”  Stephens can only imagine the taxes, subsidies funded by taxes, regulations and mandates that may be phase two, but the phase three profits will be missing in this instance, according to Stephens.

McKnight’s take on the process is that no one knows for sure what phase two is going to be and that’s a problem.

If lowering the cost of health care is one of the desired outcomes, McKnight believes the debate has to be shifted to what drives the cost of health care.  “Insurance is not a cost driver,” he asserted.  Instead, insurance provides a financial system that smoothes out costs.  He believes the real driver of health care costs in the United States is the way Americans live.

McKnight believes the Medicare piece of the health care puzzle is “vital,” and it’s not being addressed.  He contends the administration is “going after national health care because they can’t do anything about Medicare.”

Something not being figured into the equation, according to McKnight, is the subsidy provided by private health insurance companies.

According to a 2009 study by The Lewin Group, a health care and human services consulting company, Medicare’s current reimbursement policies pay hospitals 71 percent of private rates and doctors 81 percent of private rates.

“There are hundreds of reasons to argue against a government health plan,” McKnight said.  In almost the same breath, he reiterated that CIAB and other associations can’t take a position just to preserve the current distribution system.

Speaking of his own company, he said “The backbone of our business is our relationship with our customers.  That is not going away.  Health insurance is just one of our products.”

If the health care system changes, he believes the way producers are paid may change, but “we’ll still advise our clients,” he said.

“Our business is based on being a consultative broker,” he said.  Producers will continue to have that relationship and bring in products.

“I don’t want to be legislated out of a position…of providing that product to the client.”

According to McKnight, there’s been no talk of the cost to distribute the health care product.  “The government will have cost associated with the distribution of the (health care) product as well.  Surely, you don’t want to buy your health insurance at the post office.”  He indicated that could happen since the product will have to be distributed somehow.

Still, he’s not worried about losing clients, if health reform legislation passes.  “We deal with a lot of clients, and they understand the cost of delivery.”  He concedes there are others who don’t want to understand those costs.  “There are people who buy value,” he said, “and others who buy a commodity.”

For Congress to “cram down something this session, just because they thing they need to have a bill, is wrong,” he said.

As for the optional federal charter which was a burning issue not long ago, McKnight believes “there’s no oxygen in the air for an optional federal charter stand along bill.”  If it becomes a reality, he predicts it will be part of larger legislation.

There was a lot of talk about an optional federal charter, he said, but then “things fell apart, and the conversation shifted to systemic regulation.”

As for how the economy has affected CIAB members, McKnight explained that CIAB members are the top 250 brokers in the country, and are diverse and spread over a wide geographic area.  “The market place is different for each member, depending on what state they operate in.”

The members who operate in hurricane prone areas experienced a hard market place after Hurricane Katrina in 2005, he said, because property insurance prices went up.  At the same time, those members operating in less catastrophe prone state experience a soft market.

“We all operate in a different market depending on geography,” McKnight said, “but the economy has affected all markets.”

He’s adamant that a few insurance companies, including AIG with its problems, cannot drive the market by themselves.

When AIG experienced problems, there was finger pointing by some insurance companies alleging that AIG was lowering rates to keep business.  At the same time, there were insurance companies that thought they could lower rates and take AIG’s business, but McKnight would not blame them for the situation in the entire market place.  “Those companies don’t write all of the business,” he said.

“There has been significant competition for a lot of AIG’s business that companies thought would be available.  That affects certain areas of the business, but it does not drive the market,” he said.

McKnight has been in the insurance business for 27 years.  Since his background is construction technology, he started in insurance doing construction surety bonding.

He holds an undergraduate degree from LSU in general studies, with an emphasis on construction technology, and an MBA from LSU’s Executive MBA program.  Keeping the family tradition, he has four sons who also have LSU degrees.

McKnight is chairman of the Tiger Athletic Foundation at LSU and Chairman of Woman’s Hospital in Baton Rouge.

Named for his father in law, McKnight put together the William H. Wright endowed chair for financial services at LSU’s Ourso College of Business Administration.  With the help of his children, other individuals and insurance companies, the chair was endowed in 1996.  “He gave me every opportunity,” McKnight said of his father in law.

McKnight has served on the boards of Capital Area United Way, Better Business Bureau and the Nature Conservancy.

The LSU General College named McKnight the 1995 Alumnus of the Year, and in 1997, he was selected as one of Sales and Marketing Executive International’s outstanding individuals.

McKnight holds the CPCU designation and is one of Louisiana Commissioner of Insurance Jim Donelon’s appointments on the Louisiana Insurance Guaranty Association board of directors.