Credit Reports, Privacy, Regulatory Modernization Top 2002 Legislative Agendas

January 10, 2002

Challenges to the use of credit scoring in underwriting and rating, and consumer privacy matters related to the Gramm/Leach/Bliley Act will top the insurance issues considered by state legislatures in 2002, according to a survey of National Association of Independent Insurers’ (NAII) lobbyists.

However, NAII noted that the ongoing debate over a federal terrorism insurance backstop bill, state regulatory response to terrorism exclusions and a rapidly hardening insurance market could alter the legislative debate in some states.

“Without the ability to purchase reinsurance, companies in many states are seeking approval for terrorism exclusions for many commercial lines’ policies,” said Robert Zeman, NAII vice president and assistant general counsel. “Depending on how states handle these filings and how the business community reacts to the unavailability of terrorism coverage, the tone of the state legislative sessions and the issues debated by state lawmakers could change. Moreover, the hardening market conditions and potential market disruptions in medical malpractice and other specific lines may impact the nature of legislative agendas.”

NAII’s survey was conducted in July 2001 and the results highlighted concerns not related to the Sept. 11 terrorists’ attacks. NAII lobbyists in all 50 states responded to the survey that asked for their input on projected top legislative issues for 2002. NAII uses the survey results to plan legislative strategy in each state.

NAII lobbyists predict that credit scoring will be the most defensive issue for the Association in more than two dozen states.

“We expect to see legislative and/or regulatory proposals in at least 25 states that will ban or restrict the use of credit scores for underwriting and rating purposes. While it has been shown that there is a definite correlation between credit scores and whether a policyholder is likely to file a claim, as well as evidence that credit reports actually often help people obtain insurance rather than have insurance denied-the public and legislative perception on this issue remains skewed. Our plan is to educate policymakers and the public about the real benefits of credit scoring and to fight restrictive legislative proposals.”

Privacy was named as number two in the hit parade of expected legislative proposals.

“Many states rushed to pass privacy statutes to comply with the Gramm/Leach/Bliley (GLB) Act,” Zeman said. “Gray areas remain in matters of notification, health privacy and whether the laws passed last year were truly compliant with GLB. NAII plans to work proactively with state legislators and regulators to introduce legislation that will define gray areas and confirm language that is consistent with GLB’s intent.”

Another issue that NAII will monitor is the use of competitive market parts in auto repair.

“After reviewing the issue in 2001, many state legislatures voted to support the use of competitive parts in auto repairs because it was clear that their use increased competition in the repair parts market. This year the Certified Automotive Parts Association (CAPA) also strengthened the guidelines used to certify that the competitive repair parts are equal to or better than original manufacturer parts. However, the debate on competitive parts continues to surface, with approximately one-fourth of the state legislatures expected to see proposals that would restrict or ban the use of competitive parts,” Zeman stated. “NAII will monitor negative competitive parts proposals and battle those bills with an educational campaign, support of CAPA and legislative proposals of its own.”

Workers’ compensation also fell into the top four-issue category but specific concerns vary from state to state, according to the NAII.

“Generally the traditional issue is labor’s continued desire to increase workers’ compensation benefits without concern for cost savings,” Zeman said. “California attempted to increase benefits over the last several years but the governor vetoed the measures because needed reforms were not included. California, Florida and other major states will likely address benefit and reform issues in their 2002 legislative sessions.”

On the proactive side, NAII will continue to push for modernization of the state regulatory system.

“We have had considerable success in modernizing rate and form filing regulations for commercial lines,” Zeman commented. “We plan to follow-up this effort in the areas of personal lines rate and form filing, market conduct, and company licensing. We are working with other insurance industry representatives and regulators involved in efforts to streamline personal lines at the National Association of Insurance Commissioners. Although some movement in this direction is underway, NAII plans to proactively push for legislative proposals in several targeted states.”

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