2017 National State Legislative Agenda
NAMIC’s top agenda priority remains the consideration and adoption of modernization laws creating rate-approval standards less restrictive than prior approval. NAMIC continues efforts to identify appropriate opportunities to introduce modernization proposals in states identified by our members.
NAMIC continues to engage in dialogue with industry colleagues and legislators in an effort to craft legislation eliminating redundant and inefficient laws affecting insurance companies.
Legislative efforts to ban or severely limit the use of credit-based insurance scoring and other underwriting tools were relatively limited in 2016.
NAMIC remains vigilant in defending the use of these and other underwriting tools, including education and occupation, telematics, and other technology-based data driven tools, which will likely receive continued scrutiny from regulators and legislators for the foreseeable future.
Insurance regulators are charged with protecting consumers in two ways: by overseeing solvency and by monitoring market behavior. Increasingly, there have been instances in which regulators are using the power of their offices to promote causes outside their scope of authority. For example, in California, regulators have encouraged insurers to divest in the Iranian economy and are requiring insurers to annually disclose their “carbon-based investments.” California has also been a prominent player in an initiative asking insurers to disclose various ways in which they are responding to climate change. The most recent example is an effort known as the Multistate Insurance Diversity Survey. None of these initiatives involve regulators explicitly ordering companies to do something and fall into areas of questionable legal authority. The obvious and sometimes stated intent is to cajole insurers into doing something that is beyond the regulators’ authority. NAMIC resists these efforts wherever possible.
On a similar track, the NAIC continues to pursue initiatives that are clear attempts to gain additional power and authority. Such efforts ultimately weaken the state-based regulatory system and move the NAIC closer to becoming an unofficial national regulator. Again, NAMIC strongly resists these efforts wherever possible and we will pursue proposals to reform NAIC governance and transparency.
The regulatory burden on insurers continues to grow, often without clear purpose or a sense of the cost by regulators. NAMIC supports a vibrant state-based system of regulation and understands that much of the increasing regulation by the states is necessary both to deal with a more complicated market and to ward off worse overregulation by federal and international regulators; however, we continue to oppose burdensome and redundant regulations.
The business community was mostly successful in 2016 staving off attacks from the trial bar. Negative proposals this year again focused on bad faith, private right of action, and increases to non-economic damage caps. NAMIC continues to seek opportunities to adopt laws limiting the interest charged by third-party lawsuit lenders and we will also look for opportunities to work with civil justice reform coalitions to adopt asbestos trust transparency legislation. We stand ready to oppose “phantom damages” as well as proposals to unfairly modify civil statutes of limitations.
NAMIC continues to work throughout the country to educate regulators and legislators about the negative impacts of enacting overly restrictive regulations and legislation pertaining to property insurance markets. It is possible we will see legislation related to private flood insurance, anti-concurrent causation clauses, and similar issues in 2017 and beyond. NAMIC stands ready to educate legislators about how certain proposals can harm property insurance markets. For example, we will work to educate policymakers of the necessity of ensuring that residual market mechanisms use actuarially based pricing. We will also work proactively to encourage state legislators to introduce and enact “storm chaser” legislation-based model language adopted by the National Conference of Insurance Legislators. This legislation includes registration requirements, requires written contracts, includes a three-day cancellation period, provides consumers with the right to rescind, and includes an expedited process for firms registered in other states.
The NAIC has been engaged in a substantial effort to enhance solvency, corporate governance, and enterprise risk regulation. The important pieces that will be advancing in the states in the upcoming sessions are the model Own Risk and Solvency Assessment, the Corporate Governance Annual Disclosure Model Act, and the Credit for Reinsurance Model Act.
Currently 40 states have passed the ORSA Model Act and it will become a full accreditation requirement 1-1-2018 so 2017 is the last session for enactment. For the most part this model act is acceptable, but NAMIC advocates have spent significant time working with regulators and legislators to ensure that the confidentiality language in the ORSA laws adopted matches the model language.
The Model Corporate Governance Annual Disclosure was adopted by the NAIC in 2014 and has been enacted in 10 states. The model requires companies/groups to file the disclosure on corporate governance practices with their lead state on an annual basis. The disclosure will include the information set forth in the model regulation that is necessary for the insurer to gain an understanding of the insurer’s corporate governance structure, policies, and practices. This model is in the process of becoming an NAIC accreditation standard, but it will likely not be required until the end of 2019. We expect more legislative activity on this model in the next session. Farm mutual companies are concerned about how the model will be applied to them. NAMIC advocates are discussing this issue with regulators in multiple states.
The Model Credit for Reinsurance Act/regulation was adopted by the NAIC in 2011. In 2015, NAMIC changed its position on this model to one of support. This model revises the collateral requirements for foreign reinsurers. It considers both regulatory requirements of the country of domicile and individual criteria about foreign reinsurers to assess collateral requirements instead of requiring 100 percent collateral for all foreign reinsurers. More than half of the states have passed the model act representing approximately 70% percent of the reinsurance market. This model will be a full accreditation standard in 2019.
As of this writing, 37 states have adopted TNC legislation adequately addressing “Period One” coverage. NAMIC continues to work with industry partners to ensure that legislation adopted in the remaining states conforms to the National Compromise/NCOIL model.
NAMIC continues to work with industry colleagues on efforts to create a legislative and regulatory framework to address other “shared economy” business models that have implications for personal insurance policies.
NAMIC continues to oppose proposals that result in increased costs for auto insurance customers.
We oppose sectors of the auto repair industry in their efforts to pass legislation that would restrict consumer options regarding auto repair and deliberately limit the information insurers can make available to consumers, thereby impairing the ability of consumers to make informed decisions on repairing their vehicles.
We are working with industry partners in an effort to adopt model legislation at NCOIL to create a uniform regulatory framework for the towing industry.
Evidence has yet to be produced proving that any type of auto insurance verification system achieves the goal of reducing a state’s uninsured motorist rate; however, when a state switches from one verification program to another, it creates compliance costs for insurers. If policymakers are determined to change a state’s auto insurance verification system, NAMIC will continue to encourage adoption of legislation based on the Insurance Industry Committee for Motor Vehicle Administration’s model act.
Efforts by health care providers to shift costs of increasing health care claims to auto insurance policies have become more prevalent. These efforts take a number of iterations, including an increase in auto financial responsibility limits, asymmetrical billing practices that allow health care providers to seek higher reimbursement rates from auto insurers than they would be entitled to, and medical protocols that mandate expensive diagnostic testing or trauma response activation fees regardless of whether such tests or protocols are medically necessary. Charging patients more because liability insurance may be available not only drives up the cost of liability insurance, it unfairly increases the risk that the injured party will not have adequate funds from which to be made whole. It also increases the risk that the tortfeasor may have personal exposure if the liability limits are significantly consumed by the medical provider’s excessive billing practices.
NAMIC opposes efforts to shift health care costs in ways that seek recoveries exceeding amounts generally recoverable from health care insurers. We support fee schedules limiting reimbursement amounts benchmarked to the Medicaid reimbursement rates, as well as statutory responsibility for a healthcare provider’s diagnostic testing and trauma fees to appropriately associate to the severity of the auto accident.
A new horizon exists for insurance companies due to technological advancements in electronic commerce and customer interfaces, the ongoing development of semi-autonomous and autonomous vehicles, and proliferation of drones and robotics into the mainstream. With these advancements come challenges in both the physical and cyber world. NAMIC will seek solutions to the risk management, data privacy, legislative, and regulatory changes that lay ahead for insurers as these new technologies integrate themselves into society and the business sector. Furthermore, NAMIC will seek passage of legislation that allows for the execution and submission of electronic titles, powers of attorney, odometer readings as well as the use of digital notaries.
Targets of Opportunity:
The NAMIC Board of Directors created a Mutual Structure Task Force to work with staff to propose a Principles Statement to help guide advocacy regarding legislative efforts related to mutual insurance holding company and demutualization laws. The task force developed a set of principles that were adopted by the Board in September 2013.
NAMIC supports laws and regulations that advance the continuation and health of the mutual insurance company structure. NAMIC recognizes that many mutual insurers use the mutual insurance holding company model as a viable and long-term operating structure while retaining mutuality as a core value. NAMIC acknowledges the need for laws that allow companies to change their organizational structure and supports the ability of a business to pursue different options in order to remain viable. NAMIC views demutualization as an option of last resort, not as a matter of operational preference. NAMIC supports legislation that preserves the membership rights of mutual insurance company policyholders and preserves surplus built up over time by past policyholders for the benefit of present and future policyholders.
NAMIC is focusing on targeted areas for reform. Areas of emphasis for this year include continued focus on cost drivers, including opioid abuse, formularies, and fee schedules. We also oppose efforts to enact “Opt-Out” proposals similar to the Oklahoma law recently deemed unconstitutional by that state’s supreme court. We also oppose health insurance cost shifting and case shifting.
NAMIC continues to work in concert with member companies to reform or repeal broken no-fault auto insurance systems in states where the environment is ripe for real reform.
For many years, insurers have applied depreciation factors to both the labor and materials for actual cash value policies and replacement costs policies, and they have priced their premiums accordingly. NAMIC opposes regulatory and/or legislative efforts to require insurers to calculate actual cash value policies by separating labor costs from material costs, and applying depreciation only to the material costs. Both labor and materials appropriately constitute the value of property, and the cost of the damaged property over time should be depreciated as such for both actual cash value policies and for replacement cost policies where property is not repaired. Prohibiting labor depreciation is based on the incorrect assumption that the value added to property by labor never depreciates.
NAMIC has assisted farm mutual member companies in several states during the past few years with revising their governing statutes. Although enactments have varied from state to state, most allow for new geographic territory for farm mutual companies and eliminate outdated and sometimes contradictory sections of the code. We continue to pursue progressive proposals that will help ensure the future viability of farm mutual companies.