NU Online News Service

WASHINGTON --Democrats have seized control of the U.S. House of Representatives, and possibly the Senate, for the first time since 1994 in mid-term elections, which will create a more consumer-oriented agenda for the property-casualty insurance industry to deal with, according to lobbyists.

Several industry analysts said in notes to clients Wednesday morning that they believed James Webb, leading in Virginia by a small margin, will prevail over incumbent Sen. George Allen; and that Jon Tester, who is leading incumbent Sen. Conrad Burns, R-Mont., will win as well.

That would mean that Sen. Chris Dodd, D-Conn., who is prideful of his support for the insurance industry, would become chairman of the Senate Banking Committee. Sen. Dodd was primary author of the original Terrorism Risk Insurance Act, enacted in late 2002, and is also an author of legislation reining in class-action litigation involving securities enacted in the Clinton administration.

There were some losses of familiar faces in the House, caught up in the Democratic tide.

Rep. Nancy Johnson, R-Conn., serving her 11th term in Congress and a strong supporter of the industry, was defeated handily. And Rep. Jim Leach, R-Iowa, the first Republican chairman of the Financial Services Committee after the Republican takeover in 1995, but stepped down because of term limits in 2001, also was defeated. He was in his 14th term in Congress.

Rep. Sue Kelly, R-N.Y., also was apparently defeated in the Democratic wave. She chaired the Oversight panel of the House Financial Services Committee and was a strong voice for the industry on the committee, especially on terrorism risk insurance issues.

For the here and now, there are two p-c insurance issues on the congressional agenda for a lame-duck session now scheduled to start next Tuesday. They are the surplus lines/reinsurance regulation bill passed by the House in late September, and legislation reforming the National Flood Insurance Program.

Given the scope of Republican losses and the fact the program doesn't need reauthorization, and because there were no hurricanes, the program has enough money on hand to pay claims, said. Carl Parks, senior vice president of government affairs of the National Association of Mutual Insurance Companies. He sees the lame-duck session as punting on the issue and confining itself to must-do legislation.

While the agenda will move to the left in the Senate, Joel Wood, senior vice president for federal government relations at the Council of Insurance Agents and Brokers, said he believed bipartisanship will continue to prevail in negotiations for new legislation at the House Financial Services Committee, and, likely, in the Senate Banking Committee as well.

At the same time, Mr. Parks said he sees a potential for more oversight hearings in the House, where Rep. Luis Gutierrez, D-Ill., is the presumptive head of that committee. Mr. Parks pointed out that Rep. Gutierrez was the primary sponsor of legislation mandating a study of the use of credit-scoring in setting rates for financial services transactions by the Federal Trade Commission. The study was due this fall, but the FTC is now saying that the study is unlikely to be completed until spring, Mr. Parks said.

Because of the presence of Rep. Gutierrez and the fact that committees other than Financial Services may seek to air insurance-oriented issues, Mr. Parks said he also anticipated greater scrutiny of such issues as mold, the industry's antitrust exemption under the McCarran-Ferguson Act, data security, and privacy. He noted that the Supreme Court has agreed to review a case involving when personal lines insurers must provide an adverse action notice to customers.

Under Democratic control of the House, Rep. Barney Frank, D-Mass., will become chairman of the Financial Services Committee, with Rep. Richard Baker, R-La., the ranking minority member.

Rep. Paul Kanjorski, D-Pa., will assume Mr. Baker's role as chair of the Capital Markets, Insurance and Government-Sponsored Enterprises Subcommittee.

Mr. Parks said insurance regulation will be a key topic on the congressional agenda in the next Congress. But whether legislation creating an optional federal charter or something more like the federal standards legislative proposal initiated by Rep. Mike Oxley, R-Ohio, current chair of the committee, through the drafts of the so-called State Modernization and Regulatory Transparency Act (SMART) will prevail is unclear.

While hearings are likely, Mr. Parks said that because the industry is divided, Congress is expected to be hesitant about involvement in something now dominated by the states, and support for either approach is cloudy.

Mr. Parks sees Democratic control of the House to be positive for extension of the Terrorism Risk Insurance Act before it expires Dec. 31, 2007, and more sympathy for creation for a long-term, public/private partnership to deal with catastrophic risk and terrorism risk issues going forward.

In California, GOP candidate Steve Poizner captured the insurance commissioner's office, riding on the coattails of Gov. Arnold Schwarzenegger and benefiting from a lack of enthusiasm from traditional Democratic quarters for Lt. Gov. Cruz Bustamante.

In Oregon, a public question, Measure 42, that would have barred the use of credit scoring by insurers in calculating premiums went down to defeat, with more than 65 percent of the electorate voting against the measure.

Incumbency ruled in Oklahoma where Democrat Kim Holland turned back a nasty challenge, and in Kansas where GOP insurance commissioner Sandy Praeger bucked a blue trend in her state. This was credited in part to her predecessor, former National Association of Insurance Commissioners president, Kathleen Sebelius, who rode to an easy victory.

Mark E. Ruquet and Steve Tuckey also contributed to this story.

Special Reports /

Democrat House, Senate May Create Consumer P-C Agenda

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