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CRITICAL ISSUE REPORT Panel assesses P-C market changes Catastrophes, rating models, tax codes and new capital are topics of discussion By Phil Zinkewicz This month is the beginning of a new regime on Capitol Hill as the Democrats, having thumped Republicans in last November’s elections, take control by having won a majority in both houses of Congress. It is a good time, therefore, to speculate as to how the insurance interests and their issues of concern will be addressed with Democrats’ greater influence on the federal scene. In a post-election take by the National Association of Professional Insurance Agents, Executive Vice President and CEO Len Brevik said: “While at first blush, some might be tempted to conclude that Democrats controlling the House and Senate will be a negative for the insurance industry and for independent agents, that may not be entirely the case.” On the insurance industry’s McCarran-Ferguson limited antitrust exemption, Brevik said that, although some House Democrats have called for its repeal, the party’s leadership in the House did not endorse the call. The incoming House leadership also did not embrace a call for an optional federal charter, Brevik said. “When you look at many of the newly elected Democrats, some are more moderate and some who are in line for leadership positions are well attuned to the importance of the insurance industry to the American economy, such as Rep. Paul E. Kanjorski (D-Pa.), the most senior Democrat on the House subcommittee overseeing the insurance industry,” Brevik said. “Rep. Kanjorski has a keen appreciation of the key role played by Main Street insurance agents in assuring continued prosperity. “And, in contrast to campaign rhetoric, Rep. Barney Frank (D-Mass.), who is in line to be chairman of the Financial Services Committee, has had a good working relationship with outgoing chairman Mike Oxley (R-Ohio). In short, it’s not a foregone conclusion that the insurance industry will necessarily fare less well in the new Congress. There will still be many Republicans in both the House and Senate, along with President Bush’s veto pen, to keep any excesses in check. And, as far as the Democrats are concerned, we are optimistic that cooler heads will prevail on key insurance issues.” Pat Borowski, PIA National senior vice president, said that the 2006 election has moved Congress to the center. “This election has brought in more moderates on both sides of the aisle,” she said. “That tends to permit a more balanced consideration of our issues. Historically, insurance has fared better during times of centrist, results-oriented leadership. Since it is our job to achieve positive results for our members, we need to work effectively with both sides to achieve results favorable for our issues.” Brevik and Borowski offered this “quick take” on how priorities and prospects may change in the new Congress: • TRIA — Chances improve for a bipartisan effort to craft a long-term terrorism insurance solution. Moderate Republicans may be strengthened by Democrats, especially those from the Northeast. Opposition lessens. • Tort Reform — Democrats and tort reform go together like oil and water. Don’t hold your breath. • Flood Insurance Reform — This issue will continue to plod along no matter who controls Congress. Are those flood maps done yet? • Repeal of McCarran-Ferguson — Some Democrats may push for it, but it’s not yet clear whether they will get any traction. • SMART — Insurance reform package featuring “federal tools” is less likely to be viewed favorably. • Optional Federal Charter — The bad idea that just won’t die will linger. Some Democrats will push it, but cooler heads like Rep. Paul Kanjorski will prevail. • Business Taxes — Tax relief will be talked about, but the focus will be more toward individuals and small businesses. • Estate Tax Repeal — Steadfast opposition from Democrats will bottle up any estate tax repeal. This issue is dead for now. • Health Care — Expect more talk and congressional hearings. Major reforms could be proposed by Democrats, but there may be no real push until after the 2008 presidential election. Despite rhetoric, Democrats may be reluctant to commit and risk a “Hillary Care” label before 2008. • Association Health Plans — The proposal to exempt certain health insurance from state regulation is dead for now. Charles Symington, senior vice president of government affairs and federal regulation for the Independent Insurance Agents and Brokers of America (IIABA), sees the new Congress as one bound to be more “consumer focused” and said that the insurance industry may have to reevaluate its lobbying approaches. “Those who have been pushing for a federal optional charter had better be prepared,” he said. “They may get more than they wished for. As opposed to a federal option, they may stand a chance of seeing a mandatory federal regime.” Symington said also that McCarran-Ferguson will be closely examined by the new Congress and that, in turn, will lead to greater scrutiny of the insurance business overall. “We hope that Congress will look at targeted legislation affecting the surplus lines industry and agents’ licensing,” Symington said. Regarding TRIA, Symington said he is optimistic that the law will be renewed before the 2007 cutoff date. “Barney Frank and Chris Dodd have expressed support for the legislation in the past,” he said, “and we’re hopeful that this time around TRIA will be renewed for at least two years or longer.” On the company side, Joe Annoti, a spokesman for the Property Casualty Insurers Association of America, which represents smaller insurers, said there are “pros and cons” to the new Democratic Congress. “On the ‘pro’ side, the outlook for TRIA is more positive than it was the day before the elections were held. Representative Barney Frank and Senator Chris Dodd are still supporters of the law, and with the Democrats in control we might be able to avoid that eleventh-hour renewal of the past. On the flip side, there could be a serious attempt to repeal McCarran-Ferguson. The Democrats will be looking at proposals for an optional federal charter a lot differently than Republicans. The same is true of SMART, which we favor. On tort reform, it’s going to be a battle to keep the victories we’ve won in place. One thing is certain: We will have to build up new relationships in the coming years.” Julie Rochman, senior vice president for public affairs for the American Insurance Association, which represents the larger insurers, said that she, too, sees Congress as being more consumer-oriented than in the past. However, she also said that the narrow victory for the Democrats in the Senate has really not made all that much difference. “We have to work both sides of the aisle; that’s all,” she said. She does not see an optional federal charter as “dead,” and she said TRIA will probably benefit from the change in Congressional control. “The idea is to put a long-term program in place,” she said. As for the flood program, she said everyone agrees that the plan needs change and that it’s not a partisan issue. Therefore, change will occur. Clearly, the key insurance trade associations are watching develop-ments on Capitol Hill very closely, and their lobbying efforts will have to be adjusted. * The author |
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