Tort Reforms Targeted In New Congress

Looking first at class action reform, Carl Parks, senior vice president with the Des Plaines, Ill.-based National Association of Independent Insurers, said he expects the issue to come up early in the new Congress. "Weve worked long and hard on this issue," he said. "It came close in previous Congresses and it should have momentum for final passage in 2003."

Monte Ward, vice president with the National Association of Mutual Insurance Companies in Indianapolis, added that the change in leadership in the Senate enhanced chances for passage.

He noted that getting the legislation through the Senate will require 60 votes–the amount needed to cut off a filibuster. However, Mr. Ward said, he thinks it is possible. "We have bipartisan support for this issue," he said.

Looking at both class action reform and medical malpractice reform, David Farmer, senior vice president with the Alliance of American Insurers in Downers Grove, Ill., said both issues will be discussed and debated and probably will move forward. However, he said, it is hard to say how far. But the change in the Senate will certainly allow both issues to receive a more receptive hearing, Mr. Farmer added.

Turning to asbestos reform, Mr. Farmer said it is important not to entangle asbestos with medical malpractice and civil justice reform. Opponents of asbestos reform, he said, will try to center the debate on whether it is or is not tort reform. However, he said, the Alliance sees asbestos as separate and distinct.

(The asbestos reform legislation focuses on the health question of what defines a compensable asbestos-related disease. By contrast, the class action legislation would make it easier for defendants to have class action lawsuits heard in federal courts. The medical malpractice legislation would place constraints on medical malpractice awards.)

Gary Karr, a representative of the Washington-based American Insurance Association, said that for AIA asbestos reform is the top commercial lines issue. He noted that 61 companies have declared bankruptcy due to asbestos claims, and the economic issues associated with asbestos will be important to this Congress.

Mr. Karr said that asbestos reform has bipartisan interest. "We are optimistic we can get it done this year," he said.

Turning to insurance regulation, Mr. Karr said that AIA sees optional federal chartering as the next major step following enactment of the Gramm-Leach-Bliley Act. However, he said, AIA recognizes that this will probably require a multi-year educational effort and that the issue is still at its early stages.

Maria Berthoud, senior vice president with the Alexandria, Va.-based Independent Insurance Agents & Brokers of America, agreed. "Insurance regulation will consume Congress for many years to come," she said.

There are, Ms. Berthoud said, no easy solutions. The House Financial Services Committee, she noted, will start with hearings, although individual members of Congress will introduce a variety of bills. However, she does not believe that either House Financial Services Committee Chairman Mike Oxley, R-Ohio, or Rep. Richard Baker, R-La., who chairs the Capital Markets and Insurance Subcommittee, have made any decisions on which direction they want to go.

Mr. Ward said he believes the committee will focus on monitoring state regulatory reform efforts, although there may be a bill, possibly a life insurance-only proposal, later in the year.

Mr. Farmer agreed, noting there is much greater unity in favor of optional federal chartering on the life insurance side of the business. In addition to a life-only bill, Mr. Farmer said, there may be legislation on other approaches, such as federal minimum standards.

But while the House Financial Services Committee looks at insurance regulation, its Senate counterpart–the Banking Committee–will likely be focusing on privacy. The new chairman, Sen. Richard Shelby, R-Alabama, has taken a strong position in support of significant privacy protection. Indeed, he said he supports requiring financial institutions to get the affirmative assent of their customers (called opt-in) before sharing any personal information.

Moreover, Sen. Shelby says this standard should apply whether the information is to be shared with an affiliate or a third party.

Mr. Ward said that Sen. Shelby is so prominent on privacy that it could be the issue that makes or breaks his chairmanship. Mr. Parks agreed, noting that Sen. Shelby has carved out a niche for himself as a strong privacy advocate and there is every reason to believe he will push hard for tough legislation.

Mr. Karr said that AIA opposes any privacy measures that go beyond those in the Gramm-Leach-Bliley Act but is confident his group can work with Sen. Shelby.

In addition, Congress must reauthorize the Fair Credit Reporting Act, Mr. Farmer said. This has privacy implications, he noted, since insurance companies need information to do their jobs, while consumers want privacy. It is a complex issue, Mr. Farmer said, and one that has implications for insurance of all types.

Mr. Parks added that not only does FCRA affect privacy, it could also lead to an examination by Congress of how insurance companies use credit scoring.

Turning to terrorism insurance, IIABA's Ms. Berthoud said she expects to see the Financial Services Committee hold oversight hearings to determine how well the legislation is working. "Without a doubt," she said, "the committee will closely examine the bill to see if it really does reduce the problem of affordability and availability."

Mr. Farmer agreed. So far, he said, the Treasury Department and the Kansas City, Mo.-based National Association of Insurance Commissioners have been working well together on implementation of the legislation. The concern, he said, is not the NAIC but the possibility that individual states may decide to go in different directions.

The inability to put together a coherent uniform program could lead Congress to put pressure on the regulatory system, he said.

Mr. Farmer added that the Treasury Department will be developing capabilities on insurance in its role as a reinsurer that it has not had in the past. However, he emphasized that Treasury will be acting as a reinsurer, not a regulator.

In addition to these issues, industry representatives identified several other matters that could arise next years. These include:

Estate Tax Repeal: The Bush administration and some Congressional leaders want to make estate tax repeal permanent. Ms. Berthoud said that there may be the necessary 60 votes in the Senate to accomplish that goal.

Taxes: Mr. Ward said that NAMIC will continue working to increase the small property-casualty insurance company deduction.

Catastrophe reinsurance: The issue of creating a federal role in the catastrophe insurance market is still alive, Mr. Parks said. The issue was debated in the context of the terrorism insurance bill and the same theory applies, he said, adding that there seems to be an increased interest in insurance and natural disasters.

Mr. Ward added that catastrophe insurance was pushed aside by the debate over terrorism insurance, but it could become a big issue again if there is a major natural disaster.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 6, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.