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A New Year, A New Congress

It seems like it was just a short time ago that some Republicans in Congress were confidently proclaiming that their party had become a...
January 19, 2007

How Will the Interests of Agents Fare in a Newly Divided Government?

PIA National Senior Vice President of Communications Ted BesesparisBy Ted Besesparis
Vice President, Communications
PIA National

It seems like it was just a short time ago that some Republicans in Congress were confidently proclaiming that their party had become a "permanent majority" on Capitol Hill. At the time, it was tempting to write off that assertion as simple political posturing. There was just one problem: many of the people making the assertion actually believed it.

In politics, confidence is a virtue but over-confidence can be a killer.

On November 7, 2006 the owners of Congress - the voters, not the politicians or the lobbyists on K Street - decided that many of their elected representatives needed to be less permanent, giving them the old heave-ho.

We will leave it to the scores of professional political pundits and the parties themselves to spend the next two years broadly analyzing and spinning the results of the midterm elections of 2006. We will concentrate instead on the implication of those results on PIA's insurance issues. But first, we must take passing note of the political climate in Washington, D.C. and the pitfalls of believing in your own invincibility.

It is understandable that Republican Party officials are trying to put the best face on what President Bush called the "whoopin'" his candidates received at the polls. A period of soul-searching and blame-fixing within the GOP is already underway, just like the one in 1994 when the shoe was on the other foot and the Democrats were cast into the political wilderness for a dozen years.

The early spin from the Republicans is that the verdict of the voters was not really a repudiation of conservatism. Only time will tell.  Karl Rove is saying that the election losses were no big deal because Democratic gains were at or below the incumbent party's usual losses in the sixth year of a presidency, and that many of the Democrats elected are "conservative." When all votes are certified, it looks like in the House the Democrats will record about the same popular vote this year as Republican congressional candidates did in 2004, when the GOP was saying the results of that election constituted a political realignment.  If that was the case, voters dissatisfied with how the country was running took Congress into the electoral repair shop for yet another realignment in 2006.

Impact on Insurance Issues

The new Congress will alter the insurance agenda on Capitol Hill, but losses for the industry are not a foregone conclusion. Some observers have predicted that Democratic control of Congress means the insurance industry will be playing defense. But this pessimistic view may be in the minority. Keep in mind, too that there is a divergence of opinion within the industry on what constitutes "pro-insurance" positions on key matters.

For example, some insurance groups such as CIAB and ACLI are strong supporters of optional federal charters, while PIA and NAMIC - along with the NAIC and NCOIL - fervently oppose them. Some groups pine for a federal regulator and some adamantly support state regulation.

Still, there have been calls for investigations into claims practices relative to the aftermath of Hurricane Katrina which may be used by some to score political points at the expense of the insurance industry. Already, a bill has been introduced calling for the repeal of the industry's limited antitrust exemption under the McCarran-Ferguson Act.

One thing to consider is that the Democrats like to position themselves as strong consumer advocates. Therefore, they may be less amenable to providing regulatory relief from strong, state-based insurance consumer protections via an optional federal charter. In addition, they may be particularly reluctant to create the new federal bureaucracy and federal regulator that would be necessary with an OFC, lest they provide fresh evidence to back up the continuing charge from the GOP that Democrats are "tax and spend liberals" who always favor more regulation. (We will point this out to the Democrats.)

One development that has caused us some concern is the fact that one of the more reasonable Democrats, Rep. Paul Kanjorski (D-Pa.), who will take over as chairman of the House Financial Services Committee's Subcommittee on Capital Markets, Insurance and Government-sponsored Enterprises may be flirting with the idea of using an optional federal charter to force reforms. For example, a proposal has surfaced that would impose a requirement for an all-perils policy on insurers who want to be federally regulated.

In addition, one of Kanjorski's legislative assistants has started talking to the press, taking it upon himself to elaborate on what is allegedly his boss's thinking, suggesting that the congressman is now more open to including P&C in an OFC bill, not just life insurance, his stated position.

The prospects for enacting a permanent solution for insuring against terrorism attacks have brightened considerably with Sen. Chris Dodd (D-Conn.) as the new Chairman of the Senate Banking Committee. Dodd says he wants prompt action on a permanent solution, rather than merely extending the temporary federal reinsurance backstop due to expire next year. "It's an issue we'd like to see if we can get something done early - if we go with some sort of a permanent proposal," said Sen. Dodd. "I don't want to go through another extension."

Ironically, a TRIA solution along the lines of the one crafted by retiring House Financial Services Committee Chairman Mike Oxley (R-Ohio) and Capital Markets Subcommittee Ranking Member Richard Baker (R-La.), which was torpedoed last year by the Bush Administration, could now re-emerge.

Rush to the Middle

It is also interesting to note that after the election, some industry groups were tripping all over each other to proclaim how well prepared they are to deal with the new Congress, because they had perused a strategy of working both sides of the aisle. While some groups like PIA actually do work both sides as a matter of course, others started doing so only quite recently, in the manner of a deathbed conversion.

According to the non-partisan Center for Responsive Politics, insurance political action committees and individuals in the industry had given a total of $22.8 million to candidates in House and Senate races as of September 11, with 66 percent or $15.1 million of that going to Republicans. The recipient of the most insurance money based on FEC reports was Sen. Rick Santorum (R-Pa.) ($416,000), who trailed by double digits in polls throughout the campaign and went down to a double-digit defeat.

Ray Lehmann, Washington Bureau Chief for A.M. Best, noted in a commentary that those who prepared for a flip in control of Congress have an advantage.

"Advocates who succeed in this new [political] environment will be those who prepared for the possibility," Lehmann wrote. "This means not only those who devoted staff and resources to both sides of the aisle, but those who conducted themselves in a generally above-board manner over the years. However, after 12 years of Republican control, some advocates who may have given short shrift to the other side, or shown the same sort of arrogance that voters punished on Election Day, soon may find that elephants aren't the only animals with long memories."

One thing is certain: the 2006 election has moved Congress to the center.

"This election has brought in more moderates on both sides of the aisle," notes PIA National Senior Vice President Patricia A. Borowski. "That tends to permit a more balanced consideration of our issues. Historically, insurance has fared better during times of centrist, results-oriented leadership. Since it is our job to achieve positive results for our members, we need to work effectively with both sides to achieve results favorable for our issues."

Notes of Caution

Despite the signs that all advantages for the insurance industry might not be lost with the 110th Congress, there are things to keep an eye on.

Rep. John Dingell (D-Mich.) may at some point seek to assert jurisdiction over insurance issues from Rep. Barney Frank's (D-Mass.) Financial Services Committee. This would not be good news, as Dingell has expressed support for federal regulation of insurance.

As previously noted, the ascension of Rep. Paul Kanjorksi (D-Pa.) as chairman of the Subcommittee on Capital Markets, Insurance and Government-sponsored Enterprises - if Dingell doesn't wrest insurance away - comes with a caveat: Kanjorski is expected to introduce legislation that would allow for some form of optional federal charter for insurers.

In addition, Judiciary Committee Chairman John Conyers (D-Mich.) might entertain the idea of a repeal of the insurance industry's limited antitrust exemption.

A Counterbalance

Divided government means that for every proposed action, there is a counterbalance.

With Iraq, stem cell research, the minimum wage and a host of other issues of primary importance to the Democrats, insurance issues may get short shrift.

And despite the new challenges posed by Democratic control of the 110th Congress, the fact remains that while the balance of power on Capitol Hill has tipped, it is now a shared power that requires more, not less, cooperation between the parties to pass legislation. The days of ramming legislation through are over for the moment.

"There will still be many Republicans in both the House and Senate along with President Bush's veto pen to keep any excesses in check," noted PIA National Executive Vice President & CEO Len Brevik. "We are optimistic that in this bipartisan environment, cooler heads will prevail when key insurance issues are debated."

Ted Besesparis is Vice President of Communications for PIA National.

PIA Connection

This article originally appeared in the January 2007 PIA Connection.