While the decisive Election Day defeat of a credit scoring initiative to ban the practice in Oregon might have heartened the industry, there is concern that may not be the end of the debate nationwide.

Neil Alldredge, vice president for the National Association of Mutual Insurance Companies, said the fact that Colorado, Maryland, Massachusetts and Oregon now have the governor's office and both houses of the legislature controlled by Democrats could pose challenges to the industry in general.

Credit scoring in particular may emerge as an issue thanks to a study by the Federal Trade Commission, due for release in the first quarter of 2007, which could provide grist for the opponents' mills.

In addition, the U.S. Supreme Court's first look at the credit scoring issue this term–surrounding the issue of adverse-action notices–could provide new guidance for state lawmakers revisiting that issue, according to consumer advocate Birny Birnbaum, director of the Austin-based Center For Economic Justice.

Meanwhile, the sunny skies of the 2006 hurricane season may have provided a brief respite for insurer bottom lines, but none for lobbyists who want to make sure legislators do not pass bills that hamper insurer efforts to manage risks following disasters.

Once again, Mr. Alldredge noted, the industry awaits a federal report–this time from the Department of Homeland Security, on the industry's post-Katrina and Rita performance–that could inspire troubling legislation. “It is very possible that we could see both state and federal proposals advocating legislation to force insurers to offer all-peril homeowners' policies,” he said.

Mr. Birnbaum said more consumer-friendly legislators and general concern with the industry's post-catastrophe performance could make for lively legislative debates. “States have seen massive market failures in companies walking away from catastrophe-prone areas and raising rates sky high on property, and not lowering them on auto where losses have been lower,” he said.

When lawmakers try to stop insurers from nonrenewing policyholders who have suffered catastrophe losses, or raising rates to actuarially-sound levels, the industry contends this makes them unable to manage their exposures properly.

However, industry critics will likely be just as quick to retort, “And this, in a year of record profits?” in arguing that insurers have exploited recent disasters to gouge consumers. As a counterpoint, industry representatives will point out new catastrophe models to indicate their profits could be literally blown away by a windstorm at a moment's notice.

Mr. Alldredge said some legislatures may take what he termed positive steps in the area of catastrophe risk. “Alabama lawmakers, for example, are expected to introduce legislation that would require building codes in the state's 10 most-southerly counties,” he noted.

Mr. Griffin said the industry will be looking to see what state lawmakers can do to provide things such as tax incentives to property owners who retrofit or make their property more catastrophe-resistant. In that event, insurers might be more likely to offer additional premium incentives for the same purpose, he said.

State lawmakers might also look at disaster funds, such as the Florida Hurricane Catastrophe Fund, to see if that could be part of their risk management program.

A regional fund of catastrophe-prone states might be developed as an alternative, Florida Insurance Commissioner Kevin McCarty said last month at the National Association of Insurance Commissioners quarterly meeting in San Antonio.

For most industry representatives, the rate freedom issue underlies most of the availability problems confronting disaster-prone states. To address this, Mr. Griffin said several states, including North Dakota and Georgia, will be looking at so-called “flex rating” in which personal lines writers have a certain percentage leeway to raise or lower premiums as a means of starting on the road to rate freedom.

The Democratic sweep of the U.S. Congress could make rate freedom in any optional federal charter bill problematic, thereby putting new pressure on the states from companies to come up with a local solution, industry lobbyists say.

Meanwhile, lack of action on an asbestos claims trust fund bill in Washington could also prompt more states to take matters into their own hands by crafting legislation–such as bills recently enacted in Georgia, Ohio, South Carolina, Tennessee and Texas–to establish medical criteria to ensure that those claimants who are definitely ill get first crack at compensation through the legal system.

“This takes the lawsuits that are there, and ranks them so that if you are a plaintiff who has actually manifested the symptoms of the disease, [you] will be put at the front of the list,” Mr. Griffin explained. Those without such symptoms are put in a “holding pattern” for future action, he added.

“We will see more states getting on this bandwagon in 2007, and we will be working closely with those states,” Mr. Griffin said.

On another matter, Mr. Birnbaum said that market conduct legislation could find itself on dockets with the approval of a model law revamped last year by the National Conference of Insurance Legislators, which he said “makes it more difficult for regulators to do the job of regulating.”

There has been scant interest in the model jointly approved in 2004 by both NCOIL and the NAIC. Mr. Griffin said PCI could support the new model in states where it would be an improvement over the current situation.

As one of the most critical commercial lines, workers' compensation reforms could also be important this year. “In some states, we would like to address things in a positive manner, like medical costs,” said PCI's assistant general counsel, Don Cleasby. Fee schedules, utilization review and managed care are among the tools available to rein in costs, he noted.

The newly installed president of the NAIC, Alabama Insurance Commissioner Walter Bell, said getting an interstate compact functioning smoothly will be a top priority. He said the compact mechanism could also serve in nationalizing other regulatory sectors, rather than its current emphasis on life product review.

He also stated flat out that “we will end up with a different scheme this year” to replace the current 100 percent collateral requirement for alien reinsurers. A proposed change to create a new office to rate reinsurers and require collateral to cover U.S. liabilities from all–except for domestic carriers in the top-three rated categories–is due to be voted on by September.

While many new state lawmakers will be blue in political affiliation, they will also be green in terms of experience thanks in part to term limits–prompting the exit of 268 representatives this year–according to a study by the National Conference of State Legislators. Mr. Alldredge said the “education” of all these new members will be a challenge for his staff, “but we are ready.”