Washington

Shaping health care and financial services regulatory reform legislation to the interests of their members, while keeping on top of a host of additional federal lawmaking efforts essential to the business, will keep property and casualty insurance lobbyists extremely busy throughout 2010.

The intense Senate debate over health care reform took up most of December, with a bill passed by a party-line vote on Christmas Eve after the controversial public option was jettisoned. The House and Senate will spend this month reconciling their vastly different visions of reform.

The Independent Insurance Agents and Brokers of America said the Senate's version includes "a number of significant improvements…including the removal of a government-run health insurance plan."

Robert Rusbuldt, president and chief executive officer of IIABA, said his group remains unsatisfied with the reform options on the table, but added that "should the version of the bill that passed [the Senate] on a party-line vote ever get signed into law, at least it includes provisions that will ensure independent insurance agents and brokers are able to sell health insurance plans both inside and outside of the newly created health insurance exchanges."

One prime objection to the bills now in Congress cited by Mr. Rusbuldt is that the legislative solutions "fail to bend the cost curve for health insurance consumers, including millions of small businesspeople."

Citing a Nov. 30 Congressional Budget Office report, he said "small businesses will see little-to-no-decrease in their monthly premiums, and individuals will see an increase of 10-to-13 percent."

Joel Kopperud, a director of congressional relations for the Council of Insurance Agents and Brokers, said the biggest issue headed for conference will be the administrative cost caps on health insurers, mandating that a minimum percentage of their premium dollars be spent on actual medical claims.

"We are philosophically opposed to such federal cost controls, and believe the marketplace should prevail, not bureaucratic numbers crunchers," he said.

Leonard C. Brevik, executive vice president and CEO of the National Association of Professional Insurance Agents, said that "from the outset of the health care debate, PIA has focused on protecting the right of independent insurance agents to continue to sell and service health insurance policies, regardless of whether they are offered through an insurance exchange or not."

Mr. Brevik added that "if and when a bill is passed, agents will then have to pivot and turn their attention to protecting their interests in the implementation process, which is regulatory as opposed to legislative."

However, a host of other issues are of concern to p&c industry leaders, topped by reauthorization of the expiring National Flood Insurance Program–without any expansion into wind coverage.

Noted PIA's Mr. Brevik in comments echoed by IIABA, the American Insurance Association and the Property Casualty Insurers Association of America, "comprehensive reform of the [NFIP] must be addressed during 2010," he said.

"The current situation–with Congress kicking the can down the road by issuing short reauthorizations–is not sustainable," he said. "These short extensions are insufficient to maintain certainty in the market. Many mortgage lenders require flood insurance before real estate closings can occur. Congress creates an air of uncertainty by authorizing NFIP for only weeks or even days at a time."

IIABA's Mr. Symington added that "any reforms should include an increase in maximum coverage limits, as well as the addition of both business interruption insurance and additional living expenses coverage."

Ultimately, however, he noted, IIABA believes a long-term extension of the NFIP "should be a priority for Congress to bring much needed stability to the market."

Some groups also want Congress to settle on a comprehensive policy to deal with catastrophic risk, while others support legislation creating an incentive program offering more post-event aid for states that enact and enforce strong building codes.

Another priority is legislation changing regulation of reinsurance and surplus lines–part of the financial services reform effort, giving the buyer's home state supervisory authority–as well as ensuring that exemptions from federal antitrust law under the McCarran-Ferguson Act are sustained.

Others seek legislation to protect the replacement crash parts market. "Without this legislation, judicial action threatens this important marketplace by granting de facto monopolies to automobile manufacturers," say PCI officials.

AIA representatives cited reauthorization of the federal highway safety program under the Safe, Accountable, Flexible, Efficient Transportation Equity Act, as well as other safety-related issues (such as distracted-driving bans and graduated licensing) also must be addressed by Congress.

Meanwhile, since $3 trillion in tax revenues expire at the end of this year, the industry is on alert to protect its pocketbook.

"As the federal government searches for new sources of revenue to pay for historically high spending, insurance might be an attractive tax target given that we are one of the truly financially sound industries in spite of the economic collapse," according to Ben McKay, PCI's senior vice president of federal affairs.

IIABA said it will be "lobbying Congress to extend the individual income tax rates to stave off tax increases on the thousands of independent insurance agencies that are organized as Subchapter S corporations and pay individual tax rates," noted Charles Symington, the IIABA's senior vice president for government affairs.

The IIABA will also actively oppose any legislation that would raise taxes on individuals and small businesses, including efforts to decrease the itemized deduction limit for individuals in the top tax brackets from 35 percent to 28 percent, he said.

For the American Insurance Association and the National Association of Mutual Insurance Companies, regulatory reform is the key.

With the House having passed its version of the legislation, the focus will shift to the Senate. This is especially so since the leadership of the Senate Banking Committee announced late last month that progress was being made in drafting a bipartisan reform bill, and that the committee hoped to complete work before Congress returns to work later this month (see page 7).

Among the issues being considered by the Senate is creation of a Federal Office of Insurance, a Consumer Financial Protection Agency, systemic risk supervision and resolution authority, corporate governance, derivatives, credit rating agencies and investor protections, noted AIA President and CEO Leigh Ann Pusey.

"Our priorities will remain focused on ensuring that the unique nature of the property-casualty industry is recognized in the reforms being considered in Congress," she said. "Specifically, we will be working on how any new heightened prudential supervision standards would impact insurance companies and the treatment of insurers in any accompanying resolution authority provisions."

Ms. Pusey added that "in any of the reforms being considered, policymakers need to account for the level of risk our industry poses to the broader financial system, the nature of our business and regulatory standards, and our existing resolution and guaranty processes."

Charles Chamness, president and CEO of the National Association of Mutual Insurance Companies, said that because of lobbying efforts, as reflected in the House bill, "the financial services regulatory reform legislation likely to become law respects the state-based regulatory system in place and rightly focuses on Wall Street."

Mr. Chamness said work on natural disaster legislation is also a priority for NAMIC. "Encouraging states to adopt, and enforce, strong building codes is simply good policy that will save lives, property and taxpayers' money,' he said.

He added that Congress may take up other natural disaster legislation, and House Financial Services Committee Chair Barney Frank, D-Mass., has said he intends to hold a hearing on insurance regulatory modernization at some point in 2010.

Special Reports /

Insurers, Producers Focus On Washington As Key To Their Regulatory Future In 2010

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