PCI’s David Sampson: A brighter US regulatory outlook

PCI’s David Sampson: A brighter US regulatory outlook

Property/casualty insurers are in a strong position as we start 2011, and PCI is cautiously optimistic about our legislative and regulatory goals in the coming months. We certainly face a much improved political and policy environment than we could have anticipated at the beginning of 2010. At worst, we are much better positioned to prevent really bad policy from moving forward, and at best, we’ll be able to advance meaningful, market-based reforms.

Despite the challenges we faced last year, and will face this year, our industry had many successes in 2010. Those successes give us an opportunity to build on our achievements and advance meaningful reforms at both the federal and state levels. To set the stage for 2011, let’s take a brief look at what we accomplished in 2010, when we faced a much less favourable environment:
-We were largely successful in carving out the industry from most provisions of the Dodd-Frank Act and the authority of the new federal regulatory bodies the Act created – especially the Bureau of Consumer Financial Protection.

-Congress reauthorised the National Flood Insurance Program (NFIP) through September 30 2011, and did so without adding wind coverage.

-We largely limited attacks on underwriting criteria across the country by state legislatures.

-We achieved the first steps on a path to commercial deregulation (and we will expand the lines affected this year as planned).

-We successfully passed a more efficient guaranty fund tax recoupment provision.

These successes give us a great starting point to launch our agenda for 2011, and it is a robust one indeed. We have some momentum. But the old Washington adage that “no victory is ever complete, and no defeat is ever final” certainly is true.

The political debates of 2011, both on Capitol Hill and in the state legislatures, will centre on the size and role of government versus the private sector. In a political environment in which we are likely to see continued ideological polarisation, we have an opportunity to articulate the positive role a strong property casualty industry plays in our nation’s economic success.

Our industry has a key advantage in that we have a powerful story to tell. The property/casualty industry has a proven track record and was one of the few financial sectors that performed well throughout the financial crisis. We will highlight this track record and the industry’s credibility to advance an agenda of promoting private insurance market-based policies both at the federal and state levels.

One very important federal issue, on which we will be working with regulators, is the implementation of the Dodd-Frank Act. The act will rewrite the landscape for financial markets as its effects will impact consumers and permeate all sectors of the economy.

Our objective will be to preserve the legislative intent of the bill, as it appropriately distinguishes insurance as very different from other financial sectors and recognises the strong consumer protections already in place in the states.

Additionally on the federal level, we will continue to engage consumers and lawmakers to highlight the importance of the NFIP. We will push hard for greater certainty and stability, including a long-term extension for the NFIP and meaningful reform to restore its fiscal soundness.

Taking a state-level view

We also have a number of key issues in the states on which we will aggressively engage throughout 2011.

Threats to underwriting freedom are an ongoing concern, and we expect them to remain so this year. As in 2010, when bills to ban or restrict the use of insurance scoring were introduced in 26 states – and all failed – we expect continued challenges in more than 20 states in 2011. We will continue to make every effort to educate lawmakers and regulators how consumers benefit from freedom in underwriting practices, and to set the record straight at every opportunity. States in which we may see action on this issue include: Alaska, Arkansas, Connecticut, Florida, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Michigan, Minnesota, Montana, Nebraska, New Hampshire, Oklahoma, Pennsylvania, Texas, Vermont, West Virginia, Wisconsin and Washington.

Also, always an area of concern in the states are the various trial bar initiatives, bad faith bills and tort reform issues that we can expect to arise. Last year, PCI helped defeat or stall bad faith bills in five states and trial bar initiatives in nine states. This year, we will work with industry partners and allies on highlighting how the trial bar agenda does not provide consumers with additional protections, but rather increase costs for consumers and businesses.

States which may see movement on these issues include: California, Florida, Illinois, Louisiana, Maine, Minnesota, Mississippi, Montana, New York, Nevada, New Hampshire, Pennsylvania, Texas, Utah and West Virginia.

A third area of tremendous concern for property/casualty insurers and consumers alike is no-fault automobile insurance, where fraud and PIP issues are prominent in Florida, Michigan, Minnesota, New Jersey and New York. In 2011, PCI will work to build coalitions, shine a light on the serious financial repercussions of fraud, and advance much-needed no-fault reform legislation.

And another key issue for our industry in 2011 will be auto body and glass repair in several states, including aftermarket crash parts, labour rates, steering and estimating systems. Last year, we helped defeat or stall negative legislation in 10 states, and we hope to build on that momentum this year. Here, we have a great opportunity to highlight how auto insurers are focused on protecting consumers, and to demonstrate that legislation restricting insurers’ ability to manage the claims repair process will create higher costs, less consumer choice and less convenience for drivers.

Finally, we will continue to make the case for market-based solutions on property insurance in areas prone to natural catastrophes. At every opportunity, we will remind elected officials that our industry helps businesses and individuals create wealth and prosperity. Without a healthy property casualty industry, the private sector would not be able to take the risks that are attendant to economic growth, capital investment and job creation. Consumers would not be able to buy houses and cars. As long as we continue to deliver on our commitment to policyholders, we will help return the economy to its former strength.

READ MORE OF THIS SPECIAL REPORT:

Global insurance and reinsurance outlook 2011
Further softening, some M&A and an increased focus on efficiency are all on the cards this year. More

Ferma’s Pierre Sonigo: The European risk management agenda
This year will be one of transition, says Pierre Sonigo, general secretary of the Federation of European Risk Management Associations. More

 

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