Insurance Regulators Endorse Plan to Ease Liability Coverage Crisis

The nation’s top insurance regulators have endorsed a proposal aimed at slowing a spreading crisis in liability insurance.

Josephine Driscoll, Oregon’s insurance commissioner and newly elected president of the National Assn. of Insurance Commissioners, said the association approved the establishment of a national clearinghouse for liability insurance last week at their quarterly meeting here.

Under the plan, the association’s Kansas City, Mo., office will be available to state insurance commissioners to match businesses and local governments with insurance companies willing to insure them.

In addition, the association agreed to form a study committee to determine how much of the liability insurance problem stems from changes in the civil law, Driscoll said. Many insurance industry officials blame the crisis on a tendency of juries to make huge cash awards in negligent death and injury cases.

“How much we’ll be able to accomplish, I don’t know,” said Driscoll. “But I feel very confident we’ll be able to find some answers. I would expect some definitive action in six months or so.”

The association also voted to continue a pilot project designed to improve the states’ ability to get advance warning when an insurance company is in financial trouble.

The association’s outgoing president, Iowa Insurance Commissioner Bruce W. Foudree, warned during the six-day meeting that one in seven insurance companies has either management or financial difficulties.

“Many companies are not going to make it,” Foudree said. “I believe the No. 1 problem facing us is the dramatic increase in financially troubled insurance companies.

“Our job is to monitor reserve adequacy. I do not think our goal should be to prevent insolvencies. As long as we have a free-enterprise system, insolvencies are going to occur. I believe the most we can hope to do is limit the harmful effects of each insolvency.”

The quarterly meeting was punctuated by two reports that warned that the AIDS epidemic will soon have a profound impact on the health and life insurance industry.

Agreed on Consolidation

The association agreed Thursday to consolidate two committees studying acquired immune deficiency syndrome to better tackle the problem. The commissioners were told by industry representatives that they could be paying out billions in health and life benefits in two years if the epidemic continues on its present course.

The industry representatives urged the association to support companies that want to test for the AIDS antibody as a way of more accurately assessing health risks before issuing policies.

The insurance industry assured the association that existing life insurance policies would be honored even if death resulted from AIDS.

They also assured commissioners they don’t want to test those enrolled in group health insurance programs unless individual medical examinations are required under their existing plans.