Producer Groups See Difficult Year Ahead On Insurance Legislation

Despite the industry's relief at extension of the federal terrorism reinsurance backstop as expiration loomed, there is still plenty of legislative work that needs to be done in the coming year at both the federal and state levels to improve the efficiency of insurance transactions--although preoccupation with the November elections may make progress difficult, producer representatives warn.

After the frenzy of activity--especially in Congress--in 2007, culminating with the seven-year extension of the Terrorism Risk Insurance Act, "a little more calm would be welcomed in 2008," according to Joel Wood, senior vice president of government affairs for the Washington-based Council of Insurance Agents and Brokers.

Still, industry lobbyists cannot afford to rest on their laurels, as "we have a full plate in 2008--more than people realize," noted Bob Rusbuldt, president and chief executive officer of the Independent Insurance Agents and Brokers of America in Alexandria, Va.

"Agents need to be aware of the issues [facing them in 2008]," according to Robert P. Page, president of the Alexandria-based National Association of Professional Insurance Agents.

All three producer association leaders agreed that passage of a federal bill to establish national standards for regulating surplus lines and reinsurance would be one of the major priorities in 2008.

"The highest priority will be the surplus lines legislation," said Mr. Wood.

Mr. Rusbuldt noted that the House has passed enabling legislation twice, adding now it is the Senate's turn to get the work done and pass a bill.

"I'm optimistic, but not bullish" about the legislation's chances for passage, noted Mr. Wood. But he said there is a real opportunity to get action in 2008 because legislators and industry representatives understand the importance for federal intervention on this issue.

However, not all in the industry see eye to eye on the need for broader regulatory reforms--especially if it involves direct federal oversight.

Mr. Page--who is also president of Charles A. Page and Sons Insurance Agency Inc. in Houma, La.--said PIA would strenuously oppose any attempts to permit federal regulation of the insurance industry. "We truly believe that [regulation] should be at the state level," he said. "The system is not broke."

Mr. Rusbuldt said an ongoing concern of many independent agents involves the use, filing and availability of certificates of insurance--issues, he noted, generating more and more complaints from members.

He cited misunderstandings by clients--especially in the construction industry--over how certificates are issued, processed and stored by companies.

"There are a number of issues and concerns that surround certificates of insurance, and [addressing them] involves legislative leaders, regulators, agents, our consumers and insurance companies," said Mr. Rusbuldt. "It's a big issue, one that is of concern of many agents, and we're going to try to address that as well."

Another major problem for many agents is multi-state licensing. "Modernization is needed," said Mr. Page, while emphasizing the answer must come from the states.

Agents also need to keep their eye on tax legislation that could affect them as some tax changes that benefited S-Corporations (small or single-employee companies) are set to expire, which could spell big tax hikes in the future, pointed out Mr. Rusbuldt.

While major changes will probably not pass in 2008, a party switch in the executive branch come November would make it more likely that tax proposals put forward by Rep. Charles Rangel, D-N.Y., chair of the House Ways and Means Committee, become law, if there is both a Democratic Congress and White House in 2009.

Finally, dealing with national catastrophes and flood insurance will be crucial issues in 2008, on the state and federal level.

As the National Flood Insurance Program is set to expire on Sept. 30, 2008, the IIABA will be looking for reforms and additional options for policyholders, such as business interruption insurance and an increase in content coverage and other coverage limits.

However, the industry does not support the addition of wind coverage to the NFIP, as some in Congress have been seeking.

On broader disaster issues, PIA's Mr. Page noted more than a dozen pieces of legislation offering some sort of catastrophe insurance solution. None of the bills are perfect, he said, but he believes the best solution will be found where the private sector, state and federal officials work together to plug gaps in coverage.

"This is no longer a Gulf of Mexico issue," he said, although he doubts any national catastrophe plan will pass in 2008. He said that in the year ahead, agents should be meeting and working with federal and state legislators to develop alternatives to fill any coverage gaps.

Overall, "I think we have some good chances of getting things done," said IIABA's Mr. Rusbuldt. But he added that passing the surplus lines bill, licensing uniformity and catastrophe legislation will all be a challenge.

"Those are issues that are a little murkier because they don't have hard and fast deadlines," unlike expiring programs such as flood insurance, said Mr. Rusbuldt. "Some must get done, and others are in sort of a gray area."

If nothing else, according to CIAB's Mr. Wood, 2008 may turn out to be a time for everyone to take a break from some of the more vexing issues.

"The presidential election year will allow us to take a deep breath," said Mr. Wood. "It is my hope and expectation that 2008 will be a quieter year. Not much gets done in a presidential election year."