2010 was a watershed year for the business community as Republican legislators—generally seen as more open to competitive markets—gained more than 700 state legislative seats, which allowed them to take control of many state legislatures. At the time, the National Assn. of Mutual Insurance Companies (NAMIC) and others in the insurance industry predicted that this massive turnover would result in more pro-business legislation, fewer fights to restrict underwriting freedom and turn back the clock on civil justice reforms.
Were we right? Well—essentially. None of the bills stood out as very good or very bad, but for the most part, 2012 was about progress and laying the groundwork for next year—assuming voters re-elect business-oriented state legislators in November.
Rate Modernization
For nearly 10 years, NAMIC's top legislative priority has been the adoption of modernization laws, which created rate approval standards less restrictive than prior approval. Modernization laws help stimulate competition, benefiting consumers in terms of price and choices in the marketplace. We made progress this year in our efforts to educate legislators and regulators about the consumer benefits of modernization. But we were unable to get any bills across the finish line before the end of session. In North Carolina, an auto insurance study committee adopted a report calling for improvements in the ratemaking process. The committee's recommendations will be taken up by the legislature next year. It also is worth noting that no attempts this year returned to prior approval. Hawaii did adopt SB 2769, which allows the insurance commissioner to impose temporary rates on insurers if rate filings are denied. The final bill included due process protections for insurers.
Credit Scoring
Credit-based insurance scoring has been a hot-button political issue for more than a decade, the challenge being educating legislators and the public about consumer benefits related to insurance scoring. It was less than 5 years ago when no fewer than 35 states introduced nearly 100 bills—none of which were enacted—to ban the practice. This year only a handful of states debated such bills, with none of them moving through the legislative process. Does this suggest a change in legislative mindset? Maybe, but with new legislators comes the responsibility of educating them about underwriting freedom. NAMIC educates first-term state legislators about this vital underwriting tool. The biggest victory of the year by far is in Michigan, where, after years of litigation, the legislature finally adopted a package of bills based on the National Conference of Insurance Legislators' (NCOIL) model. As of this writing, the bill package is awaiting the governor's signature. Also on the underwriting front, legislation in Maryland to restrict the use of geography-based rating was stopped short.
Related: Read the article by Paul Blume, Jr. “Driving Force.”
Civil Justice Reform
Trial attorneys' efforts to pursue anti-civil-justice-reform initiatives were mostly fruitless this year. On the bright side, NAMIC enacted a few minor tweaks in tort laws and made positive headway on third-party litigation funding. Also called lawsuit lending, third-party litigaction funding refers broadly to the practice of providing money to a party to pursue a potential or filed lawsuit in return for a share of any damages award or settlement. A relatively new phenomenon in the United States, litigation funding has the potential to alter our legal landscape, affecting the civil justice system in negative ways. NAMIC is working with industry partners to ban or severely restrict this practice. Although no bills were adopted this year, the issue was debated in several states and is now a topic of conversation at NCOIL. NAMIC played a key role in shaping the debate through its issue analysis, “Third-Party Litigation Funding: Tipping the Scales of Justice for All.”
Natural Disaster & Coastal Issues
In Connecticut and Rhode Island, insurance departments or the legislatures answered the one-two punch of Hurricane/Tropical Storm Irene by revising guidelines for acceptable application of hurricane deductibles (Connecticut) and adopting a weather-related claims bill that, among stipulations, limits application of a hurricane deductible to once in a calendar year (Rhode Island). Yet the industry did make some progress in efforts to move states toward actuarially sound rating and loss mitigation along coastal zones. In Florida, legislation was passed to lower assessments proscribed by the insurer of last resort, Citizens. In Alabama, legislation passed that will allow policyholders to create tax-free catastrophe savings accounts and give premium tax credits to companies for coastal writing. In Mississippi, adoption of HB 1410 allows for an insurance premium discount or insurance rate reduction for homeowners who build, rebuild or retrofit an insurable property to better resist hurricanes or other catastrophic windstorm events.
Workers' Compensation Reform
NAMIC is working with industry partners to enact necessary reforms to state workers' compensation systems. Areas of emphasis include efforts to reform requirements and practices that drive legal involvement by attorneys in claims that should be handled administratively; reforming provider reimbursement by enacting market-oriented measures and modernizing fee schedules and treatment parameters; reducing over-regulation and reducing insurance fraud. This year, Maine enacted legislation to modify certain benefit levels and durations that has been generally viewed as positive by the industry and business community. In Missouri, the legislature overcame a gubernatorial veto to pass SB 572, which makes changes relating to occupational diseases, liability for workplace injuries, civil actions, certain toxic exposures and death benefits.
No-Fault Reform
NAMIC is working with member companies to reform or repeal broken no-fault auto insurance systems in states where the environment is ripe for real reform. The Florida legislature adopted Gov. Rick Scott's PIP reform legislation, which is a step in the right direction. The industry continues to work with regulators and legislators in Michigan to reform its no-fault system, but significant work remains to find a mutually agreeable solution, and the debate could linger into next year. The Minnesota legislature sent the governor a PIP fraud bill that is a small but positive step toward real reform. In New York, NAMIC is part of the Fraud Costs New York coalition seeking to develop support for legislative measures to reduce fraud and medical provider abuse in the state's no-fault system. Regulatory PIP reform has been in the works in New Jersey for some time.
About the only trend we have seen coming out of the states in the past 2 years is legislation focusing on those piranha-like contractors who sweep in after a devastating storm to take advantage of homeowners when they are at their most vulnerable. We call them “storm scammers.” NAMIC and other industry advocates have been working hard in the states to enact legislation protecting consumers from fly-by-night contractors. To date, 14 states have passed legislation to protect consumers from these contractors: Missouri, Illinois, Minnesota, Georgia, Nebraska, Oklahoma, South Dakota, Kentucky, Indiana, Arizona, Tennessee, Iowa, Alabama and Louisiana. NAMIC is already working with our industry partners to line up additional states for next year.
A recent Insurance Information Institute report shows that dog bites cost $479 million, or more than one-third of all homeowners' insurance liability claims in 2011. A handful of states enacted laws this year to address this issue, including Alabama, Georgia and Virginia.
States continued to enact laws regarding the sale of portable electronics insurance. The bills require electronics vendors to hold limited-lines licenses. Coverage includes loss, theft, mechanical failure, malfunction, damage or other applicable peril. The 2012 enactments or bills that are still under consideration include: Arizona, Colorado, Delaware, Georgia, Hawaii, Idaho, Indiana, Kentucky, Louisiana, Maine, Minnesota, Mississippi, New Hampshire, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Utah, Washington and Wisconsin.
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