The Democrats' dramatic takeover of Congress in last week'selection will create a more consumer-oriented environment for theproperty-casualty insurance industry to cope with, but does notderail the industry's agenda–and could actually bolster support onkey issues such as federal terrorism insurance, lobbyists for thebusiness believe.

Election Day handed clear control of the House ofRepresentatives to Democrats, with a razor-thin victory inVirginia's U.S. Senate race giving Democrats a slim majority in theupper house of Congress as well.

“Under pressure from his constituents,” Rep. Barney Frank,D-Mass.–who will become chairman of the House Financial ServicesCommittee–”will have a more consumer-oriented agenda,” said CarlParks, senior vice president for governmental affairs at theNational Association of Mutual Insurance Companies.

Indeed, he warned, even the controversial issue of allegedredlining by insurers could be examined again–perhaps not in theFinancial Services Committee, but by other committees interested invarious consumer issues.

“There is no doubt that the insurance agenda in aDemocratic-controlled Congress will be more consumer-oriented,”agreed Charles Symington, senior vice president of governmentaffairs and federal relations for the Independent Insurance Agentsand Brokers of America.

Joel Wood, senior vice president for federal governmentrelations at the Council of Insurance Agents and Brokers, also saidthat Rep. Frank will be much more attuned to the “consumer” agendathan during the years of Republican rule. “Any insurance regulatoryreforms will be viewed through the prism of consumerism,” hepredicted.

However, he added that he believes bipartisanship will continueto prevail in negotiations for new regulatory legislation out ofthe House Financial Services Committee–and, likely, in the SenateBanking Committee as well.

“The good news for us in the Senate is that Sen. Chris Dodd,D-Conn., who is very familiar with our industry and our issues, isgoing to be the chair of the Senate Banking Committee,” said JulieRochman, senior vice president of government affairs and federalrelations at the American Insurance Association.

The National Association of Professional Insurance Agentscautions that a Democratic-controlled Congress might alter theagenda on Capitol Hill, “but losses for the industry are not aforegone conclusion,” said Len Brevik, PIA's executive vicepresident and CEO.

“The more things change, the more they may remain pretty muchthe same,” he said, explaining that, while at first blush “somemight be tempted to conclude that Democrats controlling Congresswill be a negative for the insurance industry and for independentinsurance agents, that may not be entirely the case.”

Specifically, noted Pat Borowski, PIA senior vice president, theelection has moved Congress to the center. “This election hasbrought in more moderates on both sides of the aisle,” she said.“That tends to permit a more balanced consideration of ourissues.”

She explained that “historically, insurance has fared betterduring times of centrist, results-oriented leadership. Since it isour job to achieve positive results for our members, we need towork effectively with both sides to achieve results favorable forour issues.”

Among the key insurance issues likely to be impacted by theseismic political shift in Washington:

NAMIC's Mr. Parks said insurance regulation will be a key topicon the congressional agenda in the next Congress.

However, whether legislation creating an optional federalcharter or something more like a federal standards proposal–theState Modernization and Regulatory Transparency Act–will prevail,is unclear. SMART lost its champion–Rep. Mike Oxley, R-Ohio,current chair of the committee, who did not seek re-election and isleaving Congress.

While hearings are likely, Mr. Parks said, because the industryis divided over regulatory reform, Congress is likely to behesitant to get involved in something now dominated by thestates.

CIAB's Mr. Wood said that while Rep. Frank has been open to thenotion of an optional federal charter for life insurers–andpotentially commercial property-casualty–”he has indicated anextremely strong rejection of personal lines rate deregulation or apersonal lines federal charter.”

Mr. Wood said that in two recent meetings with Rep. Frank, “heindicated that the surplus lines reform legislation is an exampleof the kind of bill where we've already worked things out,” and hewould anticipate moving them through the committee again nextyear.

However, IIABA's Mr. Symington said that “in thestate-vs.-federal regulation debate, industry proponents of anoptional federal charter should think twice before pushing such aproposal in the 110th Congress. Senior members of the Democraticcaucus have already expressed interest in reforming theMcCarran-Ferguson Act, which very easily can turn into mandatoryfederal regulation rather than optional federal regulation.”

He called this dynamic “a perfect example of being careful whatyou wish for, because the industry will not achieve deregulation atthe federal level.”

Mr. Parks also sees the potential for more oversight hearings inthe House, where Rep. Luis Gutierrez, D-Ill., is the presumptivehead of the House Financial Services Oversight Subcommittee.

Mr. Parks pointed out that Rep. Gutierrez was the primarysponsor of legislation mandating a Federal Trade Commission studyof the use of credit scoring in setting rates for financialservices transactions. The study was due this fall, but the FTC isnow saying it is unlikely to be completed until spring, Mr. Parksnoted.

Because of the presence of Rep. Gutierrez, and the fact thatother committees might seek to examine insurance-oriented issues,Mr. Parks said he also anticipated greater scrutiny of such issuesas mold, the industry's federal antitrust exemption under theMcCarran-Ferguson Act, data security and privacy.

NAMIC's Mr. Parks sees Democratic control of the House as apositive for extension of the Terrorism Risk Insurance Act, set toexpire on Dec. 31, 2007. He also expects more sympathy for creationof a long-term, public/private partnership to deal withcatastrophic risk issues.

CIAB's Mr. Wood echoed Mr. Parks' view on TRIA renewal. “Weexpect the terrorism reinsurance issue to again gather bipartisansupport in the Financial Services Committee,” he said, adding that“if anything, Democratic control of the House likely will make theTRIA reauthorization issue less bumpy from a leadershipstandpoint.”

Sen. Patrick Leahy, D-Vt.–who would likely head the SenateJudiciary Committee under Democratic control–co-sponsored a billcreating an alternative claims-handling process for victims ofasbestos in the workplace with Sen. Arlen Specter, R-Pa., thecommittee's current chair. The bill failed to win enough votes onthe Senate floor to continue with debate.

However, Julie Rochman, senior vice president of governmentaffairs and federal relations at the American InsuranceAssociation, said it is “unclear if asbestos will come up” in thenext Congress in any substantial way.

She added that while there is “no doubt the [Democrats] willhave an agenda, they haven't disclosed it in detail, so we don'tknow if asbestos will be on their must-do lists,” noting thattraditionally, Democrats have been less inclined to take on tortreform issues.

However, she added that asbestos is somewhat different, “becausepeople who aren't sick are being compensated under the currentsystem, and people who are sick from asbestos are either gettingpennies on the dollar or nothing at all.”