House Passes Surplus Lines Reform Legislation

The House of Representatives passed HR 2571, the Non-Admitted and Reinsurance Reform Act of 2009, on Sept. 9.

The bill, authored by Reps. Dennis Moore, D-Kan., and Scott Garrett, R-N.J, will simplify the tax remittance and compliance responsibilities surplus lines brokers must discharge, says the National Association of Surplus Lines Offices (NAPLSO). The legislation also will bring efficiency and cost reduction of regulatory compliance in placements with multi-state exposures, according to NAPSLO.

“This is the third time the House has passed this legislation. We are hoping the third time is the charm and the bill will be signed into law,” said NAPSLO Executive Director Richard Bouhan.

More than 25 percent of commercial insurance in the United States is placed in the surplus lines market, also known as the nonadmitted insurance marketplace. Replacing existing state regulations with a uniform approach under which the rules of the insureds’ home state apply in the case of multistate placements is a tremendous advantage in providing Americans quality insurance products, according to The Council of Insurance Agents & Brokers.

“Adopting this reform legislation is a practical solution to longtime marketplace problems,” said Council President Ken A. Crerar. “The result will be lower costs to insurance consumers and greater access to affordable products.”

The bill now moves to the Senate (S 1363), where it was introduced on June 25 by Sens. Evan Bayh, D-Ind., Mel Martinez, R-Fla., Mike Crapo, R-Idaho, and Bill Nelson, D-Fla.

“We are hopeful the Senate will take up the legislation either as the individual bill (S 1363) or as part of an overall insurance regulatory reform bill,” says Mike Ardis, communications director for NAPLSO. Ardis says it’s more likely that the legislation would be incorporated into a larger Senate bill, however.

The House passed similar versions of the NRRA in the last two sessions of Congress. The Senate considered a similar bill in 2008 but it took no action prior to the end of the 110th Congress, requiring that the bill be reintroduced in the 111th Congress.

“We are encouraged by our discussions and look forward to the Senate passing the bill soon,” said Maria Berthoud, partner, B&D Consulting, a Washington, D.C., firm working with NAPLSO. “A number of proposals are being considered by the Senate and we believe the NRRA will be included as part of these reforms.”

Insurers Report Surge in Suspicious Claims

Property/casualty insurers report that the number of claims suspected of possible fraud has jumped 13 percent for the first half of this year compared to last year’s first six months.

A review of suspicious insurance claims referred to the National Insurance Crime Bureau during the first half of 2009 shows increases in nearly all referral categories.

Suspicious car fires are up 20 percent, suspicious auto glass claims up 76 percent and product liability claims shot up 90 percent, the Bureau said.

A total of 41,619 “questionable claims” were referred to NICB in the first half of 2009 compared with 36,743 received during the same period in 2008.

Property referral reasons showed an increase of 20 percent. Hail damage accounted for the largest increase in property referrals, with a 135 percent rise. Fire/arson referrals saw the smallest increase with 8 percent.

Casualty referrals showed an overall increase of 15 percent in the first half of 2009.The largest increase was seen in slips and falls, with a 47 percent rise.

Commercial referrals showed an increase of 19 percent. The largest increase in commercial referrals was seen in product liability, with a 90 percent rise. Construction, farm and heavy equipment (not theft) referrals showed the next largest increase with 89 percent. Cargo theft, false/inflated business interruption, vehicle theft and farm loss referrals all decreased.

Duplicate billing accounted for the largest increase in workers’ compensation referrals with a 100 percent rise.