Now that most state legislatures have closed shop for the year, it's a good time to look back at highlights and lowlights and take stock of how insurance issues fared in the 2010 state legislative sessions.
Overall, on a nationwide basis, the 2010 session was a bit quieter than expected by many insurer representatives, likely due to a couple of factors. One, for most states 2010 is an election year, which can shift attention from substantive matters and make incumbent legislators think twice about pushing potentially controversial issues. Two, many states continued to struggle with budget deficit shortfalls due to the economic conditions, leaving little time and energy to focus on other matters.
Probably the biggest win for the industry this year came in what didn't get done. In light of the poor economy, many expected a continued and even heightened interest in legislative bans or substantial restrictions on credit-based insurance scoring. In one sense, expectations were met, as 27 bills were introduced across the country. But the bill filings did not amount to an outright overall assault on the practice, and no bills prohibiting or unduly limiting scoring were passed.
Not unexpectedly, economic conditions did prompt some states to consider and enact legislation addressing "extraordinary life circumstances" in insurance scoring. Such bills, intended to protect consumers whose insurance scores have deteriorated due to uncontrollable factors, were enacted in Kansas (H.B. 2563/2501), Iowa (S.F. 2075) and Connecticut (H.B. 5014). The Connecticut legislation also moved the state's regulatory requirements and standards regarding insurers use of credit-based insurance scores from regulation to statute.
Missed opportunities
But although what didn't get done defined success for some issues, for others it meant missed opportunities. In New York, the industry devoted a considerable amount of time, attention and resources to reforming the state's auto insurance no-fault system to reduce or eliminate medical provider fraud.
The chairs of the Assembly and Senate insurance committees took up the issue in earnest early in the session, holding a hearing and working group sessions. The insurance department and governor's office were engaged as well on the issue throughout the session. However, the resulting legislation, the Automobile Insurance Fraud Prevention Act of 2010 (A.B. 11596, S.B. 8414), ended up being unacceptable to the insurance industry because it would have eroded the no-fault tort threshold by expanding the definition of "serious injury." Industry representatives hope at this point that the work performed this session will provide a foundation for moving the issue forward in the future.
Another missed opportunity came in Florida when, early in June, Gov. Charlie Crist vetoed omnibus property insurance legislation–the product of an extensive deliberative work process which would have marked some progress for the Sunshine State's troubled market. Although a disappointment, the veto was not unexpected because Crist, who has a history of choosing political expedience over sound policy when it comes to insurance issues, is a candidate for U.S. Senate.
Politics over policy
Politics trumped policy in Georgia this year as well, with the passage and signing of H.B.1364, legislation allowing employers to obtain retroactive coverage from the Georgia Insurers Insolvency Pool after the insolvency of a captive workers' compensation insurer, even though the insolvent insurer was not a participant in the pool at the time the claims at issue were made.
The legislation, which allows employers to pay in an amount that bears little relation to their actuarial risk to obtain retroactive coverage for employees, was adamantly opposed by the industry during the session because it violates core insurance principles and establishes improper precedent. Its constitutionality is being challenged in court.
In Florida, the industry had hoped to avoid a veto but got one, while in Georgia the industry had hoped for a veto but did not receive one. In both cases, however, the decision of the governor was not unexpected. In Rhode Island, on the other hand, the industry had high hopes that the governor would heed widespread urging to veto adverse auto repair legislation, but such hopes were dashed when the timeframe for a veto lapsed and the bill became law without the governor's signature. In all three instances, it appears as though the governors were motivated by politics rather than the pursuit of sound policy.
The Rhode Island bill, S.B. 2508, will require independent appraisals for all auto repairs with an initial estimate more than $2,500. This anti-consumer mandate, unique in the country, will add cost and delay to the auto repair process and will threaten the effectiveness of direct repair programs that provide drivers with a convenient and efficient means of getting their cars repaired quickly. The bill is the latest piece of adverse legislation put forward by a politically connected state auto body shop association.
The Rhode Island auto repair appraisal bill will hurt consumers by increasing costs and reducing convenience, but it was cast by supporters as enhancing consumer protection. That tends to be a theme often sounded by interest groups that are really pushing self-serving legislation.
Another example from the 2010 session came in Colorado, where legislation favorable to no one but trial attorneys, S.B. 76, "Concerning Unreasonable Insurance Claims Settlement Practices," was advanced by proponents as a consumer protection enhancement. The bill was enacted, but late in the session insurer representatives were able to secure key amendments to limit its use by the trial bar in pursuing bad faith actions against insurers.
A similar process unfolded in Utah, where two trial-lawyer-supported bills, S.B. 62, UM/UIM Bad Faith, and S.B. 105, Arbitration, were opposed by the industry, but ended up being passed and enacted with significant industry-requested amendments. The bad faith bill was amended so that it would not have retroactive application to previously filed insurance claims, and requirements were established for claimants to provide certain information pursuant to a statutory timetable when an election to arbitrate or litigate is made.
There were a host of other issues concerning insurers in the states addressed in one form or another during 2010, including a number of new laws enacting bans on texting while driving, bills making adjustments to tort liability schemes, bills to make changes to fire sprinkler requirements, and legislation aimed at establishing rules for third-party financing of litigation.
All in all, state legislative sessions in 2010 amounted to neither a disaster nor an unqualified success for the insurance industry. It could have been better, perhaps even much better, but it also could have been much, much worse. With most sessions finished, attention among industry representatives is now rapidly turning to the upcoming election cycle with an eye to implications for sessions in 2011.
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