Pickens Believes Competitive Market is Best Climate for Business

Having served six years in his present office, Arkansas Insurance
Commissioner Mike Pickens has had an opportunity to see a number of changesin his state over the years. Pickens recently sat down with Insurance Journal to discuss issues of importance to Arkansas, federal vs. state regulation, the national medical malpractice crisis and much more. Below are excerpts from that interview.

DT: Could you give me an overview of the Arkansas market right now?
MP: Our P/C market is still hard. Over the last year, we¹ve seen a fairly significant tightening up of the personal lines market, particularly homeowners. We were one of the states that State Farm placed a moratorium on new business in about a year ago. I expect they’ll announce soon that they will get back into the market. They have gotten two substantial rate increases totaling more than 40 percent in the last year or so. Along with our market hardening up, we’ve seen companies tightening up on their underwriting restrictions. We’ve also had a lot of inquiries about credit scoring. Arkansas passed legislation this year to address that issue. We basically passed the NCOIL model legislation with some tweaks. We hope this will stabilize any concerns about the particular insurer practice. We’ve also heard some concerns from independent agents about available markets and capacity. One agent told me recently they were having some homeowners concerns. They were down to two or three markets. They hope the situation will loosen up in the
next year or so.

DT: Has the mold problem been a big issue in Arkansas?
MP: We have seen an uptick in mold claims, but not anything like Texas or some other states. One thing insurers’ are now doing, is that if someone has a water-related loss, they are scrutinizing much more strictly whether or not they’ll continue to write that risk than they have in the past. We have not allowed any personal lines exclusions for mold coverage to date. We’ve basically told companies we want them to keep in place the same coverage they had in the past in that if a mold claim is directly related to a covered cause of loss, they need to pay the claim. What we may end up having to do with some of the construction concerns is to allow companies to exclude mold coverage above a certain amount, with a buyback option for consumers who want additional coverage.

DT: Any issues with workers’ comp in the state?
MP: Our workers’ comp market is still competitive and doing very well. We’ve seen very small rate increases. I think we’ve been successful because of our 1993 workers’ comp reform law, which was basically a tort reform type measure. It redefined compensatory injury because some court decisions expanded that definition. It put in place some mandatory loss control and worker safety programs and has had a remarkable effect on our market. In 1993 we had maybe three carriers in the voluntary market and now we have over 200, so that law has helped bring back competition and lower prices.

Really, our two biggest areas of problems right now are medical malpractice insurance and nursing home liability insurance. With the nursing homes, we have no companies that are writing coverage on anything more than a lose-one risk, replace-one risk, basically a zero-type growth basis. We have some surplus lines coverage available, but it is costly. That is really because of a number of lawsuits filed against nursing homes in the last three or four years. We had a Circuit Court case where a jury awarded $78 million to the family of a 93-year-old deceased person on some very questionable facts. People were hopeful the Supreme Court would throw out the verdict or reduce it substantially. They only reduced it down to $26 million, which still makes this nursing home case the largest single personal injury verdict in our state’s history. We’ve heard from a lot of nursing home liability insurers that they’re concerned with this decision.

During our session, we passed a tort reform law that made some changes to the joint several-liability provision of our laws. Also, we made some changes that tightened up the venue provision and also put caps on punitive damage. No caps on compensatory or economic damages, but it did cap punitive damages at $1 million. We’re hopeful this will have a positive impact on the medical malpractice and nursing home market.

Editor’s Note: To see the full story, see the June 23 issue of Insurance Journal Texas/South Central.