INSURANCE CHANGES APPROVED

When Dennis Ziegenhorn assumed the chairmanship of the House insurance committee early this year, he promptly announced that his leadership style would be a bit nontraditional.

Instead of being the chairman who basically controlled what the committee did, the Sikeston Democrat declared he was nothing more than "a traffic director," and would give all 26 members opportunities for input on insurance bills.

Instead of controlling what bills the committee passed out, Ziegenhorn tried to provide a forum for members of both parties to discuss bills. So as not to influence members, when it came time to vote on bills, he voted last.

The end result of Ziegenhorn's approach is that the committee passed some major pieces of legislation, including the largest insurance bill ever passed by the House. All major issues facing the panel were handled and ultimately passed into law.

"The insurance committee this year worked as a committee. All 26 people had a voice," observed Ziegenhorn.

"Some people might say that the committee was not run like it should have been run because some feel the chairman should have a strong hand," said Ziegenhorn. "But I say, the traffic director idea worked. The end result was the passage of some good bills.

"This blew the hell out of the lobbying system because they did not just have to lobby me as chairman, but every member of the committee."

The sixth-term legislator took over the committee from former Rep. Dewey Crump of St. Louis County, who resigned last fall amid convictions on felony drug charges and allegations that he received consulting funds from insurance companies during the eight years he served as chairman.

Going into the session, the insurance committee had a cloud over it as well as many major issues that had to be addressed.

"There was intense pressure by the media to make sure we did not eat and drink too much on insurance companies. So, we just rolled up our sleeves and got to work," said Ziegenhorn.

In all, the insurance panel heard about 40 bills this session and passed five final bills. One of the measures actually encompassed six of the bills. Other bills were also combined.

Among the issues dealt with this session were insurance company solvency and accountability, updating the state's unfair trade practices act, and creating a new Department of Insurance with a division to investigate consumer problems. Legislation also requires companies to expand some of their coverage in health insurance.

One of the biggest accomplishments of the session was passage of 17 separate acts recommended by the National Association of Insurance Commissioners, Ziegenhorn said.

He explained that the federal government was moving toward passing regulations for insurance companies to provide some uniformity in laws, since many companies did business in several states. In an effort to head off federal regulation, the NAIC, which is made up of the insurance commissioners of the 50 states, came up with a model act to establish standards for states to follow.

Rep. Steve Waters, D-Canton, a member of the committee, pointed out that all states have two years to approve the model acts and Missouri is only the third state to complete the process.

He said that the federal government was quite concerned about the solvency of insurance companies, but the states did not want federal regulations. So, they prepared the model acts.

"This is probably the most sweeping insurance legislation ever passed," observed Waters.

Rep. Carole Roper Park, D-Sugar Creek, handled the omnibus insurance bill in the House, which was 300 pages long. She termed the measure "a major consumer victory that will tremendously increase the protection of policyholders."

Waters said that after two years, companies will only be able to sell insurance in states that have passed the model acts. "What this law says is we want legitimate companies doing business in Missouri."

Park called the acts, "very conservative guidelines. When you don't have these in place you are not even at par. We have never had sweeping reforms like this before. There were so many loopholes in the old laws, you could not prosecute anybody.

"If a lot of these laws had been in place, we would have been able to go after insurance companies that were insolvent," said Park.

Under the new law, managing directors are responsible if they know a company is on the verge of insolvency but do not report it; failure to do so is a felony.

Under the new law, instead of the director of insurance in Missouri having to prove that directors of companies doing business in the state have bad character when problems arise, it is up to the companies to prove their directors are of good character.

All three legislators point out that insurance companies have been supportive of the acts because they want reasonable regulations that will lead to a favorable insurance climate.

Park said the revision in the unfair trade practices act is another major step toward improving the insurance climate in the state. Under the new law, one incident reported about an insurance company can trigger an investigation and potential prosecution by the Department of Insurance. If the insurance commissioner determines there is a problem, action can be taken for a single act.

Under the old law, the insurance commissioner needed four or five complaints before it could proceed with action against the company.

Ziegenhorn stressed it is important to improve the climate for insurance companies to do business in Missouri, because the more companies that are doing business, the more competition you have, which, in turn, means better insurance rates.

He added that there needs to be a balance between having reasonable regulations on companies that still enable them to want to do business in the state, but at the same time protect consumers from fraudulent or insolvent companies.

Among the new provisions pertaining to insurance companies passed this year are: a requirement that certain insurers have annual audits conducted by independent certified public accountants; a provision for the licensing and regulation of reinsurance intermediaries; limits on the amount companies may invest in junk bonds or other high risk investments; creation of the Insurance Examiners Fund to eliminate the practice of companies directly paying the salaries and expenses of examination staff; and a provision that certain medical coverage providers be subject to the jurisdiction of and examination by the Department of Insurance.

Another key measure is enactment of the Insurers Supervision, Rehabilitation and Liquidation Act, which provides guidelines for using receiverships, rehabilitation and liquidation to protect the assets of policyholders.