NU Online News Service, Nov. 13, 10:15 a.m.EST

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The health care reform bill passed by the House and sent to theSenate is a "trial lawyer's dream," and could have some degree of a"spillover effect" to the property and casualty industry, accordingto Insurance Information Institute (I.I.I.) President Robert P.Hartwig.

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Speaking at the National Underwriter/Ernst & Young21st Annual Executive Conference for the Property andCasualty Industry, Mr. Hartwig said the industry is in an "era ofno tort reform" that began in 2006, adding that a tort crisis couldbe on the horizon by 2012-2014.

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Regarding the health care bill, he said the Congressional BudgetOffice estimated that $54 billion can be saved by implementingmedical malpractice tort reform, but the authors of the bill leftout such reforms.

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Additionally, Mr. Hartwig noted a provision in the bill thatestablishes an incentive program for states to adopt and implementalternatives to medical liability litigation. But an additionasserts "a state is not eligible for the incentive payments if thatstate puts a law on the books that limits attorneys' fees orimposes caps on damages."

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The bill also grants the Federal Trade Commission authority toconduct studies "related to insurance," Mr. Hartwig said, and hestressed that there is no language limiting that authority to justhealth insurers.

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In fact, he called efforts to repeal McCarran-Ferguson forhealth insurers a "slippery slope" that could find its way top&c one day.

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In general, with the mood of the nation trending toward populismand government expansion, Mr. Hartwig said the industry should beprepared to defend current underwriting criteria such as the use ofcredit information and education/occupation, and should also beprepared to defend future underwriting criteria.

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He said the feeling among some is that government can do abetter job insuring risk than private insurers, pointing tosuggestions to include wind coverage in the National FloodInsurance Program and the increased amount of risk taken on bystate Beach and FAIR plans. In 1990, Mr. Hartwig said, around $54billion of risk was in these plans. Now that number has grown toclose to $700 billion.

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But he said that while government can provide insurance cheaper,it is only done by tacking on heavy subsidies. He also noted thatzero claims have gone unpaid because of the financial crisis.

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Regarding the state of the industry, Mr. Hartwig said theeconomy is in the early stage of recovery, adding that it will takelonger to get out of the recession than it took to get in. Still,he said, the economy is no longer shrinking, the pace of joblessclaims is slowing, housing seems to be bottoming out, and there issome stabilization in retail.

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Mr. Hartwig noted, however, that improvement in the economyalone won't pull the insurance industry out of the current softmarket cycle. He said the insurance cycle is not tied to theeconomy and never has been, explaining that soft and hard marketshave occurred previously during both recessions and recoveries.

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Mr. Hartwig also said private business starts are still atdepressed levels, which impacts the number of insurable risks forlines such as workers' compensation. Although credit has loosenedup, he said, it has not yet reached "Main Street."

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For the next 10 years, Mr. Hartwig said insurers should bethinking about entering growing sectors such as government,education, traditional energy, alternative energy, agriculture,natural resources, environment, technology and lightmanufacturing.

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He added that health care will be an important line for insurersover the next 10 years, and will make up one-fifth of the U.S.economy by that time.

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