|2009 Session Preview|
The 2009 legislative session began last month and legislative activity has been at a minimum as the state legislature awaited the governor's recommended budget. Last week, the governor announced his plan to address the state's $5 billion dollar projected budget deficit. Now the major legislative finance committees will conduct hearings to review the governor's recommendations and begin to develop their own budget plan.
While the economic downturn, the state budget and the differences between the Republican governor and the Democratic legislature will dominate most of the attention given to the legislative session this year, there will likely be several insurance issues that will be debated. The insurance policy committees of the legislature will continue to meet and since there is no money to spend, policy issues will be a refuge for many legislators.
Here are a few of the insurance proposals that will likely gain legislative activity this session.
Stranger Originated Life Insurance. The life insurance industry and NAIFA-MN are sponsoring legislation to prohibit the sale of stranger originated life insurance, STOLI, in Minnesota. STOLI is an investment scheme where investors help seniors who have a limited life expectancy purchase insurance. After the initial two year contestability period expirers, the investor who purchased the insurance policy, continues to pay premiums and receives the policy's death benefits. The sooner the person dies the greater the return on investment. The life insurance industry considers this wagering on human life and would like it prohibited. Several states have already passed similar legislation.
License Modernization and Conformity. The Minnesota Department of Commerce will be introducing legislation to modernize the state's insurance licensing system and make our system more compatible with other states. Commissioner Wilson believes this conformity is necessary to stave off efforts for a federal agent license system.
While I have not seen the actual bill draft, I have had several conversations with the department about their proposal. It would include lowering the number of required hours of continuing education from 30 to 24 and allowing for more online education. The department would like to change the annual October agent renewal period to stagger renewal throughout the year. Agents would be required to renew their license every two years during their birth month. The department will also propose changes in pre-license education.
Certificates of Insurance. The MIIA is working on legislation to address the problem of requests for insurance certificates with changes made by the agent to standard certificate forms. This legislation would clearly state in law that agents are not able to alter an insurance policy with any changes to an insurance certificate. I will report more on this issue, when we finalize our proposal and have it introduced into the state legislature.
No-fault Reform. It doesn't appear that there will be proposal this session to repeal our no-fault system. Instead, the Insurance Federation of Minnesota will focus on eliminating fraud and abuse in the no-fault medical system. Without managed care, no-fault medical is the last insurance that pays on usual and customary fees. The current system is being manipulated especially by a few health care providers, mostly chiropractors. MIIAB will likely support the Federation's efforts.
Credit Scoring Ban. Almost every year, a bill is introduced to prohibit the use of credit scores in underwriting for homeowners and auto insurance. Already, two bills have been introduced this year. However, the current economic downturn and the credit crisis have elevated this issue. I would expect a major effort to pass such legislation this year.
These are just a few of the proposals affecting the insurance industry that will be before our state legislature. I'm sure more will pop up as the legislative session progress. It will be a very long five month session.