Federal – Federal oversight of the insurance industry appears to be more likely as President Barack Obama and members of Congress roll out plans to address the country’s economic woes in what experts say is the largest regulatory overhaul since the Great Depression.

House Financial Services Chair Barney Frank (D-Mass.) said in early February that his top priority is creating a systemic-risk regulator to oversee the activities of any financial firm – including banks, insurance companies and hedge funds – that poses a danger to the financial system. The Financial Services Roundtable (FSR) also unveiled its regulatory blueprint for financial firms that includes a federal regulator for property-casualty and life insurance firms. The FSR’s plan will be shared with lawmakers and the Obama administration.

Under the FSR’s plan, this new regulator’s position would combine the duties of the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Financial Industry Regulatory Authority. The plan would also give the U.S. Federal Reserve the authority to override other regulatory agencies if necessary to stabilize the entire financial system.

The FSR’s plan would also allow the U.S. Federal Deposit Insurance Corp. (FDIC) to insure national insurance firms, FSR Vice President for Insurance Peter Freeman said, noting that the proposal would also provide insurers with the option of becoming federally regulated.

At the end of January, six members of the House of Representatives sent a letter to newly sworn-in Treasury Secretary Timothy Geithner urging him to increase federal oversight of the insurance industry by creating an office within the Treasury or by installing someone “to fill a void on insurance oversight and expertise at the federal level.”

The insurance industry has been divided over the issue of federal oversight. After the letter was sent, the American Insurance Association’s (AIA) incoming president, Leigh Ann Pusey, commended the letter’s writers.

“It’s critical for Treasury and other public policy leaders to develop and institutionalize an insurance expertise at the federal level,” Pusey said. “Congress will soon debate the scope of federal regulation and whether to apply that oversight to insurers. That debate is certain to focus on the need to monitor systemic risk on a national basis. An OII would be a tremendously valuable tool for helping to inform that debate.”

However, members of the National Association of Professional Insurance Agents (PIA), the National Conference of Insurance Legislators (NCOIL) and others have come out against federal legislation, pointing to the downfall of federally regulated banks last fall as reason to leave the regulation of insurers up to states.

The six letter writers, however, believe the fall of another giant in 2008, insurer AIG, illustrates the need for federal oversight.

“We all share the belief that we must take steps to ensure that a similar situation does not occur in the future and we believe that an important first step ought to be the establishment of an office within Treasury which would have a knowledge base and understanding of insurance operations,” the letter stated.

Connecticut – A new law that requires disclosing to consumers that they have the right to choose the repair facility to complete repairs to their motor vehicles is now in effect in
Connecticut.

The law, passed in June 2008, took effect Jan. 1, 2009 and requires insurance companies to include the following notice on all issued insurance cards:

“You have the right to choose the licensed repair shop where the damage to your motor vehicle will be repaired.”

The notice must also appear on all estimates from insurers and shops, and it must be posted in all collision repair facilities.

The law also requires motor vehicle repair shops to provide notice to insurers of the need for supplemental repairs and to establish a time frame for insurers to inspect the motor vehicle prior to commencement of such supplemental repairs.

Bob Skrip, president of the Auto Body Association of Connecticut (ABAC), called the law “a giant step forward” in an editorial piece published in The Day newspaper.

“It will go a long way to help educate consumers that they don’t have to be afraid of insurance companies,” Skrip said. “It’s your car, and your choice where to have it repaired.”
In his piece, Skrip encouraged consumers to “have the courage” to choose the repair facility they want to use despite what insurance companies might say.

“A good consumer should call or visit more than one repair facility to learn which shop is qualified to repair your car properly,” Skrip wrote. “This is critical when you want to maintain the value in that vehicle after the repair.”

New Hampshire – New Hampshire Senate Bill 55, which would establish a commission to study “all aspects of the collision repair industry,” passed the Senate Feb. 4.

The bill’s sponsor, Sen. Betsi DeVries, said the bill addresses “the lack of adequate oversight and qualified mechanics” in the industry.

According to the bill, areas the commission would study include:

• Interactions between the collision repair industry and the insurance industry and means of strengthening working relationships of entities within each industry.
• The role of the insurance department in the collision repair industry.
• Consumer protection and dispute resolution issues, including relevant statutes and enforcement mechanisms.
• The economic importance and future of the collision repair industry in the state.

Opponents of the bill fear it’s the first step toward shop licensing in the state, according to the New Hampshire Business Review.

“It’s the little guy who gets left behind whenever you license a commercial enterprise,” Sen. Peter Bragdon said in the Review.

The commission would be made up of one member of the state Senate, four members of the state House of Representatives, two members of the New Hampshire Automobile Dealers Association (NHADA), two members of the New Hampshire Collision Repair Advisory Group, two representatives of the insurance department, two members of the insurance industry and two members of the public.

New Jersey – The New Jersey Senate is considering a bill that would allow first-party claimants to sue their insurance companies for any violation of the state’s unfair claim settlement practices without needing to prove the insurer violated the law often enough to have it considered a general business practice. Sens. Nicholas Scutari and Jeff Van Drew introduced the bill, S.B. 132, in January.

Under the bill, claimants would be permitted to sue for damages including any benefits properly due under the insurance policy with interest, plus court costs, attorneys’ fees and punitive damages if the violation demonstrates “by clear and convincing evidence, actual malice or wanton and willful disregard of persons who foreseeably might be harmed by the insurer’s acts or omissions.”

The bill would take effect immediately if passed and apply to all claims filed on or after the effective date.
The bill’s sponsors wrote that S.B. 132 is meant to incorporate New Jersey’s current case law – which already recognizes private causes of action for bad faith actions of insurance companies in first-party claims – into statutory law.