Health Care Bill 'Trial Lawyer's Dream,' Says Hartwig

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

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

Speaking at the National Underwriter/Ernst & Young 21^st Annual Executive Conference for the Property and Casualty Industry, Mr. Hartwig said the industry is in an "era of no tort reform" that began in 2006, adding that a tort crisis could be on the horizon by 2012-2014.

Regarding the health care bill, he said the Congressional Budget Office estimated that $54 billion can be saved by implementing medical malpractice tort reform, but the authors of the bill left out such reforms.

Additionally, Mr. Hartwig noted a provision in the bill that establishes an incentive program for states to adopt and implement alternatives to medical liability litigation. But an addition asserts "a state is not eligible for the incentive payments if that state puts a law on the books that limits attorneys' fees or imposes caps on damages."

The bill also grants the Federal Trade Commission authority to conduct studies "related to insurance," Mr. Hartwig said, and he stressed that there is no language limiting that authority to just health insurers.

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

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

He said the feeling among some is that government can do a better job insuring risk than private insurers, pointing to suggestions to include wind coverage in the National Flood Insurance Program and the increased amount of risk taken on by state Beach and FAIR plans. In 1990, Mr. Hartwig said, around $54 billion of risk was in these plans. Now that number has grown to close to $700 billion.

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

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

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

Mr. Hartwig also said private business starts are still at depressed levels, which impacts the number of insurable risks for lines such as workers' compensation. Although credit has loosened up, he said, it has not yet reached "Main Street."

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

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