SLIMPACT Lite establishes an interstate compact that includes a state-chosen commission of members chosen that sets formulas for national eligibility standards, collecting and allocating premium taxes, and establishing uniform payment and reporting requirements. To date, nine states—Alabama, Indiana, Kansas, Kentucky, New Mexico, North Dakota, Rhode Island, Tennessee and Vermont—have enacted SLIMPACT Lite legislation. These states have conducted a handful of teleconferences in the past month to establish a set of by-laws for the compact.

NIMA takes a more bare-bones approach in that it does not address the issue of regulatory reform, but establishes a clearinghouse of state authorities to work cooperatively to consolidate reporting and collect and allocate premium taxes for multi-state surplus lines insurance transactions. To date, three states—Florida, Hawaii, and Mississippi—have entered into such an arrangement.

What remains unclear is what additional states will join one of the two competing entities. In enacting their respective surplus lines reforms, a majority of the states left the question open, generally giving their insurance commissioner the authority to make that ultimate decision.

Perennial issues

As has been the case in the past, rate modernization, the keystone to reforming state regulation, was a high priority. While momentum for rate reform slowed in the aftermath of the financial crisis, the midterm elections brought renewed interest from lawmakers. Nine states saw some form of action on rate modernization in 2011. The biggest wins occurred in Tennessee, Connecticut and Florida.

Tennessee lawmakers passed legislation allowing for a 15 percent flex band—the largest spread in terms of plus and minus rate increases of any flex rating bill in the country—without seeking the Dept. of Insurance's approval. This measure will also allow insurers to implement the new rate on the day it is filed.

Legislation extending the 2-year sunset provision in Connecticut's personal lines flex-rating statute was a positive highlight of that state's legislative session. This measure allows insurers to continue to use for the next 2 years periodic rate changes on a file-and-use basis, as long as the rate falls within the 6 percent flex band. Complete removal of the sunset provision would likely make the statute more effective, and the industry started the legislative session with that as a goal, but ultimately the legislature did not entertain the industry's request.

Related: Read “New Faces in Legislation” by Paul Tetrault.

Florida legislators introduced a bill to implement flex rating on the personal lines side, but any prospect for it died early in the session; however, some allowances to increase Citizens Property Insurance Corp.'s—the state's insurer of last resort—glide path “angle of incline” were included in the extensive property package that was signed by the governor. The legislature also passed HB 99 that expands a 2010 law exempting other lines of commercial insurance from rate excessiveness regulation to include commercial auto and commercial property-casualty lines. It also includes commercial auto lines for fleets with fewer than 20 vehicles.

In competitive markets, prior approval of rates serves little purpose other than to prevent companies from making new products available to consumers and to impede insurers' ability to respond quickly to changing market conditions. Passage of these bills will enhance competition in the relevant states, which, in turn, will benefit consumers.

More than half of the states plus the District of Columbia considered some form of tort reform. Significant strides were made to improve the business climate in Pennsylvania when Gov. Tom Corbett signed into law the “Fair Share Act” that reforms the process of how damages are allocated in civil lawsuits. Under the Act, each defendant will now pay only his/her share of the judgment as opposed to having joint responsibility for the full amount.

In Oklahoma, four tort reform bills successfully made their way through the legislative process. The state now has a $350,000 cap on non-economic damages, which brings the state in line with 30 other states with similar caps. Most instances of joint and several liability have been eliminated, and awardees in personal injury or wrongful death lawsuits are now exempt from having to pay federal or state income tax on their award. Oklahoma also joins a growing list of states taking proactive steps to bolster fairness and provide incentive to reduce the number of uninsured motorists by prohibiting uninsured drivers from collecting non-economic damages when they sue after a motor vehicle accident. A similar “no pay/no play” law was enacted in Kansas.

In Wisconsin, first-term Gov. Scott Walker signed the Omnibus Tort Reform Act, which, among other things, limits punitive damages, raises standards for expert testimony, and toughens state rules relating to damages for frivolous claims. South Carolina's governor also signed a bill that provides limits and certain procedures on awarding of punitive damages.

Twenty-three states introduced no fewer than 50 bills to ban or severely restrict insurers' use of credit-based insurance scoring. Only two of those bills passed—Nevada, where a bill established a set of extraordinary life events that applicants or policyholders can use to ask insurers for exception; and Montana, where the legislature included military deployment as an extraordinary event in underwriting or rating. Although some state legislators continue to introduce proposals to ban or restrict the use of this valuable underwriting tool, when educated, most legislators come to realize that insurance scoring benefits the vast majority of insurance consumers.