Independent Agents and Congress Team Up in 2007

It was another productive year for the Big “I” in Congress thanks to the grassroots work of independent agents. Even in a busy year on Capitol Hill, many insurance issues were front and center in 2007.

Last year, the House of Representatives passed the Nonadmitted and Reinsurance Reform Act
(H.R. 1065), one of the more important pieces of legislation for agents. This bill provides a pragmatic
approach to modernize state insurance regulation (specifically surplus lines and reinsurance) in contrast to other legislative proposals such as an Optional Federal Charter (OFC), which would hand over insurance regulation to the federal government. With one version of the legislation already introduced in the Senate, expect an updated companion bill in the House soon.

More success came in 2007 when the House passed legislation that would modernize and reform the National Flood Insurance Program. H.R. 3121, the Flood Insurance Reform and Modernization Act of 2007, would make the program more actuarially sound. The legislation also contains key provisions backed by the Big “I,” including one that would increase maximum coverage limits and include optional business interruption coverage and additional living expenses.

The Big “I” also has been a leader in advocating for natural disaster solutions, and legislation was introduced in the House and Senate to combat the problem. The House passed H.R. 3355, the Homeowners’ Defense Act of 2007, which would create a National Catastrophe Risk Consortium and a National Homeowners Insurance Stabilization Program. Both programs would help prevent insolvencies and make the private insurance market more stable, ultimately making catastrophe insurance more available before and after a major disaster. The consortium would enable multiple states to pool their catastrophic risk, with the goal of achieving an economy of scale and risk diversity that would lead to lower reinsurance costs than states could achieve independently. The stabilization program would enable the Treasury Department to make loans to states and their reinsurance plans to ensure their continued liquidity in the aftermath of a natural catastrophe. On the Senate side, Senators Hillary Clinton (D-N.Y.) and Bill Nelson (D-Fla.) introduced the companion legislation to H.R. 3355, and the Big “I” is hopeful it will gain Senate approval next year. There is a need for a national solution and these are just the first steps toward easing the natural disaster crisis.

The Big “I” also had a productive year working on crop insurance issues. The Senate passed the
2007 Farm Bill, which included a permanent repeal of Premium Reduction Plans (PRPs). More importantly, the Senate floor defeated of the Brown/Sununu amendment to the Farm Bill that would have led to draconian cuts to the Federal Crop Insurance Program (FCIP). (See sidebar.)

Major legislation important to agents and brokers across the country was on the verge of passage as of press time. Both the House and the Senate passed extensions of TRIA, the terrorism risk insurance act, which was set to expire Dec. 31, 2007. While passing different versions of the bill, a House-Senate agreement is expected that will extend the program on a long-term basis, providing much-needed certainty to the insurance market.

One issue that did not see additional action following bill introduction early in the year, but may be looming in 2008, is the proposal to repeal the limited McCarran-Ferguson antitrust exemption for the business of insurance. The Big “I” maintains that a repeal would negatively affect small- and medium-sized insurers, independent insurance agents and consumers by decreasing competition. The hope is that the association’s advocacy this past year, including testifying before the Senate Judiciary Committee, will discourage Congress from repealing this necessary exemption.

Patrick Royal (patrick.royal@iiaba.net) is Big “I” director of public affairs.

Another Victory for Grassroots

The Big “I” scored a resounding victory in the final days of the Congressional session during Senate debate of the 2007 Farm Bill. The combination of grassroots might and an intense Big “I” lobbying effort on Capitol Hill helped to defeat the Brown/Sununu Amendment that would have cut agent commissions in the 2007 Farm Bill.

In the fall, agents from across the country responded to two grassroots Action Alerts to contact their senators and voice opposition to the amendment. Agents in Iowa, South Dakota, Nebraska and Georgia—some of the states represented by the key senators on this issue—continued grassroots efforts leading up to the Dec. 13 vote. Additionally, the Big “I” government affairs staff, along with Big “I” Chairman Bob Fulwider, met with federal policymakers to drive home the independent agent position. Special thanks goes to Senators Pat Roberts (R-Kan.), Chuck Grassley (R-Iowa), Ben Nelson (D-Neb.), Kent Conrad (D-N.D.) and Agriculture Committee Ranking Member Saxby Chambliss (R-Ga.) who were paramount in defeating the amendment.

The amendment, offered by Senators Sherrod Brown (D-Ohio) and John Sununu (R-N.H.), would have cut the A&O reimbursement that crop insurance companies receive from the government for administering the program by approximately 38%. This would have led to cuts to agent commissions of about the same amount and would have permanently harmed the entire crop insurance market. The 32-63 defeat was a clear victory for the advocacy of the Big “I” and the influence of independent insurance agents.