AIA Commends Virginia's Enactment Of Legislation Deregulating Commercial Insurance
RICHMOND, VA, March 7, 2000 -- The American Insurance Association today commended the Virginia General Assembly for enacting legislation that will reduce government regulation of commercial insurance.
The final version of Senate Bill 587 was unanimously passed by the Senate today by a vote of 39-0. While the measure was amended last week by the House, AIA said that the principal goal of the bill will still be achieved.
"The bottom line is that the primary purpose of this legislation is to increase competition by allowing insurers to enter new markets quickly with new products," explained Taylor Cosby, AIA vice president, mid-Atlantic region. "This bill still does that, even with changes made by the House. Essentially, the bill exempts large, sophisticated commercial insurance policyholders from rate and form regulation. This measure will enable these large policyholders to design insurance programs tailor-made for their specific needs, rather than being forced to buy cookie-cutter coverage," said Cosby.
To qualify for the exemption, companies must use a qualified risk manager to purchase their insurance coverage. The House amended the bill to allow companies to either employ a full-time risk manager or retain a third party consultant. In addition, the House amendment requires that a risk manager have at least one of the following credentials: a bachelor's degree in risk management issued by an accredited institution; a designation as a Chartered Property and Casualty Underwriter (CPCU); a designation as an Associate in Risk Management (ARM); a designation as a Certified Risk Manager (CRM); a designation as a Fellow in Risk Management (FRM); or five years of experience in either risk financing, claims administration, loss prevention or risk and insurance coverage analysis.
In addition, companies must meet at least two of the following criteria to qualify as large commercial risks under the legislation: have a net worth over $10 million; generate annual revenues over $25 million; employ more than 80 people; or pay annual insurance premiums (excluding professional liability and workers' compensation) over $100,000. Non-profit organizations or public bodies generating annual budgeted expenses of at least $10 million and municipalities with populations over 30,000 also could qualify as large commercial risks.
The House amended the bill to increase from $75,000 to $100,000 the amount of annual insurance premiums a company must pay to qualify as a large commercial risk.
"We believe that deregulating the approval process for these large, sophisticated customers will provide insurers with the flexibility necessary to design new and innovative products, which also will serve to increase competition as insurers are able to respond quickly to changes in the marketplace as well as to the changing needs of their customers," said Cosby.
"This legislation promotes competition and will encourage efficient and economical marketing practices," he said. "Removing some of the restraints on large commercial insurance should improve the commonwealth's business climate. This one is a winner for everybody in Virginia, including consumers, businesses, insurance companies and the Bureau of Insurance," Cosby concluded.
SB 587 has been sent to Governor Jim Gilmore, who is expected to sign the bill into law shortly.
The American Insurance Association represents more than 300 property-casualty insurance companies, which employ more than 150,000 people across the country, write $68 billion in annual premiums, and pay nearly $2.2 billion in state taxes and fees each year. AIA member companies write 25 percent of the total property/casualty insurance coverage in Virginia. AIA is headquartered in Washington, DC, and has representatives in every state.