“Virginia’s 2003 legislative session ended with the softening of many bills that could have made it much more difficult for insurance companies to conduct business in the state,” said an announcement from the National Association of Independent Insurers. The bills are still subject to the governor’s veto during the next several weeks.
“Many of the bills affecting property/casualty insurers were modified during this short session and, thus, less damaging to our industry,” stated Greg LaCost, NAII counsel. “The insurance industry did a good job of amending many of the most onerous bills during the session-specifically on measures that would have impacted the resources insurance companies currently use to underwrite and rate their products.”
During the session the NAII noted that it had fought bills “calling for prohibitions on insurers use of credit data in personal lines,” and that a “significant compromise was reached on the legislation, which takes effect Jan. 1, 2004 for new policies and April 1, 2004 for renewals, to not permit insurers to use credit information as the ‘sole reason’ for making underwriting and rating decisions instead of banning the practice of credit-based insurance scoring.” The measure also requires that credit information can be used only if it is derived within 90 days for new business and 120 days for non-renewals.
According to NAII analysis, “‘No hits’ or those with insufficient credit to produce an insurance score are treated as neutral, or receive an average insurance score, in addition to other underwriting factors considered.” The legislation also provides also provides that credit information will be updated at least once every 3 years “or at the request of the policyholder,” and that “an insurance carrier is not required to update the credit data more than once every policy term, or if the policyholder already has the most favorably priced rate based on his or her credit information.”
“Compromise legislation also was enacted providing additional notice to policyholders of homeowners insurance about the use of the Comprehensive Loss Underwriting Exchange (C.L.U.E.) reports without further restriction,” the NAII noted.
“The industry dodged an attack on companies using C.L.U.E. reports, as the language in the original bill would have required a professional inspection in order to utilize prior loss histories of prior owners of a property for underwriting,” LaCost indicated. “NAII negotiated language that states loss histories of a prior owner of a property cannot be the ‘sole basis’ for a negative underwriting decision. This clause allows companies to use any other legal factor to decline a certain risk.”
He indicated that, although the NAII would have preferred that the bill not be enacted at all, “the high probability of it passing in its prior form and the positive changes made by our lobbying late in the session make this a win for insurance companies. The final language of the bill provides that insurers and agents are not allowed to ‘base an adverse underwriting decision solely on the loss history of a previous owner of the property to be insured.'”
The NAII also “proactively supported a bill that will allow umbrella policies to exclude named persons from the umbrella policy,” and it helped pass a bill allowing an exclusion of terrorism in a commercial policy.
“In addition, a bill prohibiting the advertising or offering of rebates, coupons or payment of a person’s deductible in connection with the sale, installation or replacement of automobile glass was strengthened, and is a step in the right direction for the industry, LaCost noted. He added that “further tweaking of this statute will be considered by NAII in the future.”
The announcement also listed the following bills relating to the P/C insurance industry in Virginia in which it had actively participated:
*VA H2267- repair facilities disclosures: NAII fought this bill and obtained very favorable amendments that requires companies to disclose that a claimant is under no obligation to use a repair facility recommended by an insurer or a repair facility in which a company has an ownership interest.
*VA S1131- notices of cancellations/nonrenewals/reduction of coverage/increase in rates: such notification must be given by sending notice to the insured by registered or certified mail or a receipt from the U.S. Postal Service, under Virginia law. A positive addition was added this year that allows an additional mechanism for notices to multiple policyholders, reducing some of the burdens companies face in their day-to-day practices.
*VA H2048- birth-related neurological injury program: This program was slightly expanded in 2003 to allow payment for those infants who die within 180 days of birth. NAII has advocated the removal of the property/casualty industry from payment to the fund, and will consider a further effort on this issue in 2004.
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