PCI Says Regulatory Modernization, Credit Scoring Continue to Be Top Issues

Regulatory modernization and credit scoring continue to be priority issues for the insurance industry according to the Property Casualty Insurers Association of American (PCI).

John Lobert, PCI senior vice president, state regulatory affairs, addressed the regulatory and legislative environment with leading auto insurance company executives at the Auto Insurance Report’s National Conference in California this week.

Lobert said that urgent components of regulatory modernization include agent and company licensing uniformity, rate and form approval reform and market conduct surveillance.

“The current state regulatory command-and-control system is totally out of sync with the 21st century model of competitive commerce,” Lobert said. “These areas must be modernized and updated for state insurance regulation to compete in today’s global business environment.”

Lobert said the most divisive issue in the industry today is the question of federal regulation—in any form.

“Some of the industry want an optional federal charter, others want Congress to set standards that states must meet, while others see total federal oversight on the horizon,” Lobert said. “PCI has an aggressive plan to address the more troublesome aspects of state regulation in key states while at the same time working with Congress to make sure that anything orchestrated is in sync with our members desires. No matter what Congress does, state regulation is not going away.”

Lobert said additional key state legislative issues in 2004 are tort reform, auto issues, workers’ compensation trends, global outsourcing, loss history databases, such as CLUE, and credit scoring.

“While a relatively quiet year on auto issues, insurance credit scoring continues to be a main focus,” Lobert commented. “The industry was relatively successful in legislatures since 13 states last year that passed some form of the National Conference of Insurance Legislators’ (NCOIL) credit scoring model—while another three have this year.”

However, in some states regulators are attempting to redefine the terms of laws enacted by legislatures.

“For example, in Indiana the insurance department defined “sole” use in rating in such a manner as to basically ban credit as a rating factor. In Georgia, a year after the NCOIL model was enacted, the insurance department has not approved anything,” Lobert said.

When asked what his predictions were regarding the credit debate for the balance of 2004 and beyond, Lobert responded, “While I said earlier the industry overall had been successful, I see many states continuing to tighten up on enacted restrictions, consider bans or take regulatory action to add further restrictions.

“One thing is for sure, credit scoring issues are going to occupy a great deal of our time, energy and resources for some time to come. The challenges to insurance underwriting practices constitute the single-most important public policy issue both now and in the years to come.”