Insurance industry impact: New laws on the horizon
The 2018 election cycle means debate about insurance issues in state legislatures, and uncertain outcomes at the federal level.
The 2018 election season is having an impact on the political environment surrounding home, auto, and business insurance issues in statehouses across the country, as well as in Washington.
The insurance industry already has navigated through some complex cross-currents in the first four months of the year, with more challenges ahead. So far, this has resulted in some wins, some losses and some draws.
Underwriting and rating threats
Perennial legislation addressing underwriting and rating factors has become more intense this year due in part to the election season. In Maryland, the industry successfully defeated multiple bills that aimed to ban the use of education and occupation, gender, marital status and credit, which would have undermined the risk-based pricing foundation of the industry.
Purported consumer groups continue to exhort state lawmakers and regulators to take an extreme position on underwriting issues. Last year, New York banned the use of education and occupation with a regulation that went into effect on March 13, 2018. Now, other departments, including Vermont, are raising significant concerns about the use of such factors and signaling potential action.
The Property Casualty Insurers Association of America (PCI) and industry partners will continue to aggressively defend the use of data that are highly predictive of the likelihood of an insurance loss, allowing for more accurate underwriting and pricing.
Auto safety
PCI is engaged on auto safety legislation in many states and pursuing an aggressive consumer education campaign focused on distracted driving.
Most recently, Georgia passed PCI-supported legislation that prohibits driver use of handheld devices behind the wheel. Strong auto safety laws and enforcement are an important step in combating a growing distracted driving epidemic that is endangering everyone on the road.
PIP/No-Fault Update
Rising costs continue to plague many of the no-fault auto insurance systems.
However, personal injury protection (PIP) reform remains an uphill battle in many states in the face of fierce opposition from the medical community and trial bar.
PCI and the insurance industry were on the defense in Florida. We helped to stop a Senate bill that would have repealed the state’s no-fault system and replaced it with mandatory bodily injury coverage and $5,000 in medical payments coverage.
After early momentum in Kentucky on PIP reform, an industry-supported bill that would have subjected PIP benefits to the workers’ compensation fee schedule was turned into a study following strong opposition from the state’s medical community.
Assignment of benefits
Nebraska successfully enacted legislation that addresses assignment of benefits abuse with roofing contractors. This legislation was necessary because the trend lines for property insurance in Nebraska were starting to look like Colorado, Florida and Texas — where abusive activity by contractors and lawyers drove up the rate of disputed claims, court action and overall costs.
Unfortunately, the industry-led initiative in Florida again fell victim to the state’s challenging political environment, despite a well-coordinated coalition campaign and dramatic data on the abuse in both homeowners insurance and the auto-glass marketplace.
Highly automated vehicles
Congress is currently grappling with some of the regulatory conflicts that present barriers to the testing and deployment of highly automated vehicles. The tragedies that have hit Uber and Tesla reinforce the need to tackle the public policy surrounding liability. As policymakers consider what data should be collected and retained by automated vehicles, insurers need to be assured reasonable access to data for underwriting and claims handling.
PCI is strongly encouraging Congress to pass the AV START Act, with the bipartisan amendment that addresses access to data, to best meet the needs of consumers in the new automotive environment.
Financial services reform
A top priority is preserving the state-based system for insurance regulation, which continues to face a series of challenges, both domestic and international. Congress has introduced several reform bills that would benefit consumers, uphold the proven-effective, state-based, insurance regulation, strengthen the financial marketplace and reduce federal regulatory overreach.
Last month, the Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act. The bill includes the bipartisan Insurance Capital Standards Accountability Act of 2017, which would provide that U.S. federal representatives coordinate with state insurance regulators and speak with one voice in international forums.
Other financial services reform bills include:
- The Federal Insurance Office (FIO) Reform Act of 2017, which would refocus FIO on international matters and require FIO to coordinate more closely with state regulators;
- The State Insurance Regulation Preservation Act, which would ensure the Fed sticks to its primary job of regulating banks and savings and loans, leaving insurance regulation in the hands of state regulators;
- The Business of Insurance Regulatory Reform Act, legislation that reflects the congressional intent of Dodd-Frank that the Consumer Financial Protection Bureau should not engage in regulatory activity related to the business of insurance; and
- The Financial Stability Oversight Council (FSOC) Improvement Act, which would help insurers reduce the likelihood of being designated as systemically important financial institutions (SIFIs) by FSOC.
National Flood Insurance Program
Congress also must address a long-term reauthorization of the National Flood Insurance Program, which expires July 31 at the peak of hurricane season. If the NFIP is allowed to lapse, even temporarily, communities could be even more vulnerable to the potential threat of major storms. On a positive note, federal policymakers are taking steps to promote more private insurer involvement in flood insurance. This will be an important step toward expanding coverage options in the marketplace and addressing the major challenge of uninsured and underinsurance U.S. communities.
PCI will continue to fight through the legislative, regulatory and political headwinds that remain this year — while looking over the horizon for the next challenges and opportunities for the property casualty insurance marketplace.
David A. Sampson is the president and chief executive officer of the Property Casualty Insurers Association of America (PCI). Find out more online at http://www.pciaa.net/.
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