State Lawmakers Delay Action On Models For Alien Reinsurer Collateral, Crash Parts

At their meeting here earlier this month, advocates on both sides of both issues laid their cases out once again to the lawmakers, only to see any final action put off until the group's annual meeting in November.

But on the relatively new issue of a model law regulating the use of claims history databases, the lawmakers did give their final approval to model legislation on the topic that has been on the dockets of more than two dozen state legislatures in the past few years.

On the aftermarket parts model law, the lawmakers seemed to have little appetite for approving a law that would bless the Certified Automotive Parts Association as the final arbiter for the use of independently manufactured crash parts. Auto manufacturer representatives turned out in full force to question the quality of such parts.

"It is unlikely that an impartial certification entity can be created and relied upon to serve consumer needs without unduly focusing on the bottom line–the result of which may be an inferior crash part," said James Moor, director of franchising and state law for the National Automobile Dealers Association.

CAPA Executive Director Jack Gillis defied "anyone in this room to look at an aftermarket part and make an informed judgment as to its quality or performance."

American Insurance Association Vice President Dave Snyder opposed the measure because he felt it would eliminate the option for consumers to choose parts warrantied by the insurance carrier.

Nebraska state Senator Pam Redfield, R-Omaha, said that "NCOIL has missed the train on this one," asserting that many states have already acted on the issue.

It appeared lawmakers put off killing the measure entirely out of courtesy to NCOIL's president, Texas Rep. Craig Eiland, D-Galveston, who could not make the debate.

Meanwhile, the lawmakers continued to grapple with the controversy over alien reinsurer collateral reduction.

NCOIL gave preliminary approval to the alien reinsurer efforts to reduce their capital requirements in 2002, but the group's Executive Committee put off its final okay while the National Association of Insurance Commissioners attempted to come up with a compromise solution.

That three-year effort has failed, and the debate will revert back to the NAIC and global regulatory and accounting standard-setting bodies. The issue has implications in the effort to establish freer trade throughout the world.

The NAIC will look at proposals in September that would in essence put all reinsurers on the same playing field, "regardless of ZIP code," as proponents like to say.

However, so far, any effort to reduce the role of U.S. regulators in assigning credit for reinsurance will in all likelihood meet with stiff resistance from the domestic industry and regulators themselves.

While NCOIL is unlikely to take any action on the issue this year, the lawmakers want to keep the item on their agenda so as to be a player in the debate, which will hinge on the effort to harmonize international accounting standards as well legal and jurisdictional disputes between countries.

On the one action the lawmakers took–approving a claims history database model law–the legislators hoped to protect consumers from seeing their homeowners rates rise for unjustified reasons.

While the law prohibits carriers from using so-called mere "inquiries" in setting rates, there was some question in Newport as to what constituted a mere inquiry and what constituted a claim.

The law defines "claim" as a request for payment, while one lawmaker asserted that in some states an agent is required to report any loss that is reported to them, even if no such payment request is made.

The proposed model law permits a policyholder a single so-called "claim without payment" before any future ones would be used in rate-setting.

Opponents of this provision said it would discourage policyholders from contacting their agents to discuss policy options in the event of a loss, but industry representatives said such instances are predictive of future losses and therefore should be part of the rating process.

Florida state Senator Steve Geller, D-Hallandale Beach, proposed a substitute motion that would allow three such instances, but was voted down.

The failure only added to his frustration with the bill, which he termed a "consensus measure only in the sense that it is a consensus of the insurance industry agreeing with itself and no one else."