NAII OPPOSES BILL TO ESTABLISH FED-ERAL

A proposal by Senate Commerce Committee Chairman Fritz Hollings (D-S.C.) to repeal the McCarran-Ferguson antitrust exemption and create a new Federal Insurance Commission within the Commerce

Department was strongly criticized by the National Association of Independent Insurers (NAII). "NAII views this proposal as unfound-ed,

unjustified, and unnecessary. It provides sweeping powers to a vaguely defined new federal regulatory body and usurps the authority of states to regulate the insurance industry," said Carl Parks, senior vice president, government relations. Hollings' proposal was reportedly a surprise given the fact that many states have enacted measures to modernize the insurance regulatory system while support for the so-called optional federal charter concept has waned on Capitol Hill in the past year. Sen. Hollings' home state of South Carolina is reportedly a recognized leader in state insurance regulatory reform efforts. Most significant reportedly was the progress made in traditionally troublesome states, such as New Jersey and Louisiana. Enactment of regulatory reforms in these states can only be viewed as a positive development, according to NAII. "NAII believes that state regulation is the most desirable means through which to achieve a competitive insurance market. We recognize, however, that the support within the industry for state insurance regulation is dependent in large part on the states' instituting meaningful reforms to modernize regulation to reflect the way the business of insurance is conducted today and will be conducted in the future. The efforts made by states in the past year to enact regulatory reform is a sign of real progress and the Hollings' bill undermines these positive developments," said Parks. According to Sen. Hollings' proposal, the new commission would have prior approval authority over both rates and policies, while at the same time allowing consumers to challenge rate applications before the commission. The commission also would be responsible for licensing and standards for the insurance industry, annual examinations and solvency reviews, investigation of market conduct, and the establishment of accounting standards. "A major problem is that the bill gives no specific standards to be met, leaving all of the points for future determination by the commission," added Parks. The House Financial Services Committee has had a number of hearings this year on the federal regulation of insurance; however, no hearings have taken place in the Senate.

BILL BANNING INSURANCE SCORES FAILS IN CALIF. ASSEMBLY COMM.

California Senate Bill 691 failed to pass the state Assembly Insurance Committee recently, legislation that would have reportedly banned

the use of credit-based insurance scores for underwriting and rating homeowners insurance. Insurers can continue to rely on insurance

scores—a valid tool that boosts consumers' chances for coverage and lower premiums, according to the Association of California Insurance Companies (ACIC). "We are pleased that members of the Assembly Insurance Committee recognized that SB 691 is the wrong response to current market conditions in California," said ACIC President Sam Sorich. "Insurance scores help most consumers get better rates because most people have good credit. Without the ability to use credit-based insurance scores, most policyholders would pay more for insurance." The ability of insurers to use this highly accurate, predictive tool must be preserved, Sorich said. Banning the use of credit would harm consumers throughout the state, said Sorich, a lead witness at the committee hearing. It would take away the ability of insurance companies to identify responsible customers who should be rewarded with lower premiums. Instead, those responsible customers would have to pay higher premiums to subsidize those who are more likely to incur a loss. Combining insurance scores with other familiar factors, such as the age of a home and the number of claims filed, helps insurers gain a clearer picture of an individual's risk and fairly price policies for each consumer, Sorich said. SB 691 would have prohibited insurance companies from using the credit history or the credit-based insurance score of a consumer who is applying for or renewing a homeowners' insurance policy, a proposal that the Coalition for California Homeowners, of which ACIC is a member, believed was too radical. The coalition is an alliance of organizations—including minority business groups, neighborhood associations, construction, mortgage banker groups and individual insurance companies—dedicated to enacting sound public policy on the use of insurance scores. An alternative, reasonable and balanced approach would better serve consumers and the insurance market, Sorich said. Alternative legislation proposed by the Coalition for California Homeowners would require the disclosure and notification of when insurers will use credit, prohibits insurers from using credit information as the sole factor for underwriting and rating decisions, and prevents insurance scores from considering gender, address, ethnic group, religion, and marital status, among other factors. According to a study released recently by the California Chamber of Commerce, restrictive bills like SB 691 could drastically reduce the availability of homeowner's insurance and have a devastating impact on California's residential housing market and overall economy. The study, authored by the Rosen Consulting Group, found that a 10 percent reduction in homeowner policy availability would directly lead to a $6.1 billion decline in the state's annual gross product, a drop of $517 million in indirect business taxes, and a loss of 10,000 jobs. The total impact would reportedly be an overall decline of $9 billion in annual gross state product-equivalent to the decline in gross state product experienced during the 1992 recession—and 49,600 job losses.

FLA. GOV. SIGNS WORKERS' COMP BILL

The signing into law of important workers' compensation reform legislation by Florida Gov. Jeb Bush will go a long way toward limiting the cost of insuring workers in the state against injury and will boost the Florida economy, according to the Alliance of American Insurers, a long-time advocate of such changes. The new law (formerly SB 50A) limits attorney costs in workers compensation cases and helps curb fraudulent claims, resulting in expected reductions in workers' compensation rates of at least 12 percent. "It contains substantially all of the reform elements recommended by the Coalition of Business and Insurance Industry and an Alliance member-company task force," said William Stander, Southeast regional government affairs representative for the Alliance, a major participant in the Coalition. "By signing this bill into law, the governor has begun the process of easing the heavy burden that Florida businesses pay each day by cutting the waste and fraud inherent in the state's current workers' compensation system," Stander said. "Florida businesses currently pay the nation's second-highest rates for workers' compensation insurance, while injured Florida workers get the second-lowest benefit levels." According to Dave Anderson, Alliance vice president of workers' compensation and health, "If implemented

correctly, the cost-cutting measures in this bill will substantially reduce costs to businesses and could actually increase benefits to

workers. The reduced costs should help lower overhead for Florida businesses, giving the state's economy a needed lift and indirectly creating more jobs for Florida citizens, particularly in the small-business arena, where high workers' compensation costs have the most negative impact." Reform elements recommended by the Coalition and the Alliance and included in the new law:

• Limit hourly attorney fees to medical-only cases and then caps the amount.

• Reduce hospital fee schedules.

• Increase fraud penalties.

• Further restrict exemptions from workers' compensation coverage.

• Eliminate other inappropriate cost increase provisions.

ICT REPORTS ON TEXAS' COSTLIEST AND DEADLIEST STORMS

The Insurance Council of Texas (ICT) reported the state's costliest and deadliest storms since 1950. A tropical storm that dropped more than three feet of rain on parts of Houston was the costliest weather disaster in Texas, while a tornado in Waco claimed the most lives. "Tornadoes and tropical storm systems have historically caused a tremendous loss of life in Texas, but hailstorms account for three of the top four costliest storms," said ICT spokesman Mark Hanna. "For the nation, the destructive winds and rains of hurricanes are far and away the costliest weather catastrophes." It was the

massive flooding of Tropical Storm Allison that resulted in the costliest weather disaster in Texas. The storm stalled over Houston for several days beginning June 8, 2001, flooding the Texas Medical Center and major arteries leading into the city. Insured losses were set at $2.5 billion. Hailstorms in North Texas ranked number two, three and four for the costliest storms. Combined, hailstorms on May 5, 1995, April 5, 2003 and April 28, 1992 totaled $2.75 billion in insured losses. ICT also prepared a chart ranking the costliest Texas storm events in 2003 dollars. Tropical Storm Allison remained first, followed by Hurricane Celia in 1970, the May 5, 1995 hailstorm in

North Texas and Hurricane Alicia in 1983. "We have ranked the state's costliest storms from insured losses at the time and in today's dollars," Hanna said. "In most of the storms and in particular tropical storm disasters the total dollar loss is much higher. This was the case

in the Central Texas floods of 1998 where insured losses were only $75 million, but the total losses may have exceeded $700 million.

This emphasizes the need for many homeowners to consider the purchase of flood insurance." A spokesman for the National Oceanic and Atmospheric Administration (NOAA) said fortunately, fatality rates from weather hazards have decreased over the past 50 years. "The decrease in deaths is due to the improvements in our severe weather preparedness and warning program and our emergency management and media partners who are valuable teammates in the warning process," said Gary Woodall, warning coordination meteorologist for the National Weather Service office in Fort Worth.