The U.S. House of Representatives Financial Services Committee's Capital Markets, Insurance and Government-Sponsored Enterprise Subcommittee is conducting a series of hearings on insurance regulation. How the subcommittee addresses insurance regulation could have a long-term impact on the collision industry.

The U.S. House of Representatives Financial Services Committee's Capital Markets, Insurance and Government-Sponsored Enterprises Subcommittee is conducting a series of hearings on insurance regulation. The subcommittee has held two hearings to date.

The U.S. House of Representatives Judiciary Committee has considered for some time a blue ribbon national committee of experts to review the insurance industry from a regulatory perspective. Early in the consideration of this initiative, the Automotive Service Association discussed with the committee addressing the effectiveness of state regulation of insurers, specifically the enforcement of state insurance statutes.

Recent congressional insurance focus has been on terrorism insurance legislation. This legislation provides a backstop for commercial property and casualty insurers if a terrorist attack occurs. Long stalled, this bill is seeing some light in the U.S. Senate.

Subcommittee Chairman Richard Baker (R-La.) described the hearings: “There are several key issues facing the insurance industry today. This set of hearings will provide a forum for diverse sectors of the industry to express and elaborate on their views on uniformity, keeping the industry economically competitive and the industry responsiveness to the concerns of consumers.”

The top democrat on the subcommittee, Rep. Paul Kanjorski (D-Pa.), stated: “This is an important series of hearings to take a look at today's evolving insurance marketplace and the potential need for reform. I look forward to continuing to work with Chairman Baker and the other members of the subcommittee on these matters.”

The series, “Insurance Regulation and Competition for the 21st Century,” will review various proposals to “increase efficiency and uniformity of insurance regulation.” The first hearing was an overview of the industry.

Critical to the auto body repair industry is the reference to any federal versus state regulation of the insurance industry. This debate was pivotal in the death of national titling reform, repeal as well as reform of the McCarran-Ferguson Act legislation as well as some attempts at tort reform. How the subcommittee addresses insurance regulation in the first serious look at regulation since the passage of the Gramm-Leach-Bliley Act in November 1999 could have a long-term impact on the collision industry. With the ability of the insurance industry to offer a broader range of services comes more scrutiny at the federal level. This was evident throughout the testimony.

The Risk and Insurance Management Society, the largest professional organization for the risk management community, elaborated on the difficulties of 50 separate regulatory bodies. Michael Phillips, testifying for the Society, stated: “The current system in the United States is inefficient. Negotiating rate and form regulations in 50 different jurisdictions is expensive and time-consuming. A single regulator to establish risk-based capital and surplus requirements, as well as requirements for public disclosure of rates and forms, would reduce costs and restrictions for U.S. purchasers, and act as an incentive for increased participation by foreign companies.”

With regard to a federal charter or safety net as proposed by some in Congress, the National Conference of Insurance Legislators (NCOIL) argued that it would only build a layer of overhead and “create a duplication in process and add unnecessary expense.” NCOIL listed three items for states to improve current regulation:

• A one-stop, reciprocal and uniform system of licensing
• A fast, centralized system for policy form and rate approvals
• A fundamentally reformed system of market conduct regulation.

GEICO testified for the National Association of Independent Insurers (NAII), outlining the current status of state regulation. NAII argued that portions of the state regulatory structure are unnecessarily costly and inefficient. NAII is addressing its state concerns through industry workgroups. It does believe, however, in state regulation. NAII says that states have responded to its issues. NAII voiced its position that states need time for regulatory modernization and “unless the states prove themselves unworthy of retaining their exclusive role as insurance regulators, we urge Congress to refrain from intervention.”

NAII did point out that states have been slow to embrace regulatory reforms.

It is certainly not surprising that the insurance industry would not be supportive of federal regulation of the insurance industry. However, this is the first serious look at insurance reform since the mid-1990s and will be followed closely by the collision industry.

Bob Redding is the Automotive Service Association's Washington, D.C., representative. He is a member of several federal and state advisory committees involved in the automotive industry. For more information about the legislative activities of ASA, visit www.TakingTheHill.com.

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