“We [now] think thatin at least 30 states there will at least be some discussion with a view toward proposed restrictions on the use of credit reports,” said Robert Zeman, NAII vice president and assistant general counsel.

Roger Schmelzer, vice president-regulatory affairs for the Indianapolis-based National Association of Mutual Insurance Companies, added that while this is not a new issue, “there is probably more sentiment today to move it along” in the states.

Aftermarket Parts: Mr. Zeman believes that the struggle between allowing the use of generic or brand-name auto parts in repairing insured vehicles will be a “defensive” issue for insurers in 10 or 11 states next year.

Peter A. Bisbecos, NAMIC legislative and regulatory counsel, said he sees the aftermarket parts issue as part of a larger problem created by class-action lawsuits, which, he said, “take away the authority of a regulator and place it frequently in the hands of an out-of-state court.”

As the ability of a state regulator to perform his or her functions erodes, this draws federal attention to a particular area of insurance and “accidentally makes a case for federal regulation that shouldnt be made,” he added.

Privacy: While 46 states in 2001 addressed privacy, as required by the Gramm-Leach-Bliley Financial Services Modernization Act, 15 or 16 states will have to engage in some form of “cleanup” in the coming year, according to Mr. Zeman. This means that regulators in those states will have to either promulgate or clarify rules on the issuance of privacy notices sent by insurers to consumers, he explained.

Mr. Zeman added that the NAII will work to convince several of the states that failed to pass appropriate privacy legislation to do so in 2002.

He also noted that controversy continues to brew in some states and at the National Association of Insurance Commissioners as to whether the content of privacy notices is sufficiently readable and understandable by consumers.

Regulatory Modernization: Modernizing the regulation of rates and forms “will be the major issue we are working on in the coming year,” according to NAIC President and Iowa Insurance Commissioner Terri Vaughan.

Related to this issue, the NAIC hopes to see more progress in the areas of speed-to-market, market conduct and national treatment, among others, Ms. Vaughan said.

Although the NAIC is trying to finalize model legislation on the regulation of commercial lines, Mr. Zeman said that the NAII believes modernization is equally important for personal lines.

Terrorism: For Mr. Zeman and others, this is a “wildcard.”

“What happens in the states depends very much on what happens in Congress,” he observed.

As for the reinsurance market, “what the federal legislation might look like and then what that means in terms of how the marketplace functions, what role reinsurers will be playing–that is all part of what” the NAIC will have to consider if federal backstop legislation is put in place, observed Ms. Vaughan.

There are other issues that could prove to be “hot-buttons” in 2002.

The NAII has found that in at least nine states the trial bar is pushing to increase the minimum amount of coverage required under compulsory auto insurance laws. Mr. Zeman said the efforts are aimed at having “a bigger piece of the pie to go after” when there is a loss.

Marketplace Disruptions: Commissioner Vaughan indicated that the NAIC has been “seeing some upheaval in the marketplace, such as rate increases and companies reevaluating their business strategies with respect to particular lines.” For this reason, the state regulators will closely watch market and rate trends in 2002, she said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 14, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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