Armed for action: independent agents in many states have mounted successful grass-roots campaigns to push for new laws and regulations.

There was a time when independent insurance agent Jeanne Heisler would field 40 calls a day from desperate people willing to travel as long as two hours to buy automobile insurance at her agency near the Jersey Shore.

That was because Heisler's Ronan Agency in Brick, N.J., still had some auto insurers to do business with. "Many agents had lost all their companies because those companies had left the state," she said. "We obviously were going in the wrong direction."

The deteriorating situation spurred the Independent Insurance Agents & Brokers of New Jersey, of which Heisler is a member, to take action that contributed to passage of landmark auto-insurance reform legislation. But New Jersey's agents are not unique in their activism; independent agents in a number of other states have mounted similarly successful grass-roots efforts to push for everything from tort reform and insurance regulation overhaul, to election of favored candidates for judicial posts.

In New Jersey, the agents' association first joined the Coalition for Auto Insurance Competition, an amalgam of insurance trade groups and companies, as well as realtor and retailer associations, whose members were seeing the difficulty in the insurance environment. The association contributed financially to the coalition--"a small level compared to some of the major insurers," Heisler said, "but we also contributed time."

Independent agents participated in discussions involving the industry, state regulators and Gov. Jim McGreevey's office, on ways to make New Jersey a competitive market place for auto insurance. "We were instrumental in that," said Heisler, then a volunteer agent in the process.

Heisler has calculated that she spent the better part of 60 days in 2003 attending meetings with legislators, regulators, McGreevey staffers and newspaper editorial boards to get the association's views across. "It was a matter of educating the Legislature on the problems in New Jersey--the lack of availability," Heisler said. "We were losing companies so rapidly that consumers were having a very difficult time finding compulsory insurance. And the lack of competition was getting worse."

Only about 20 auto insurers were left in the state. Some of the major carriers in this group were exempted from New Jersey's take-all-comers law because of financial circumstances. Additional companies had filed to withdraw. The remaining companies did not have the capital to take on the business from the companies that were leaving.

"So it was critical that the Legislature understood we needed a real solution, not a political solution," Heisler said. "It was great to always say we want to roll back rates because that's what consumers would want, but the reality was it was just getting worse and had gone from an affordability crisis to an availability crisis."

One of the things that Heisler and other independent agents brought to negotiations on the legislation was their front-line experience working with consumers. They could readily explain to lawmakers to what lengths many people had to go to obtain coverage.

The association negotiated every section of the bill with the state Department of Banking and Insurance to see what would work from a regulatory standpoint and what the regulators felt was needed to aid consumers.

As a result, the legislation has consumer education and protection pieces as well as a large fraud component, Heisler said. "There were pieces of the bill that dealt with a competitive marketplace and over time, we are transitioning out of a take-all-comers environment into an underwriting environment similar to other states," she said.

What insurers viewed as inadequate rates spurred their financial concerns about doing business in New Jersey, and had caused some to leave the state because they weren't able to move rates along with the cost of repairs of cars and medical treatment. "With rate suppression and no easy way to secure adequate rates when needed" the legislation included a rate process, Heisler said. "We didn't deregulate rates, but what we've done is put in a process for rate review in a timely manner," she said.

In the end, the bill was passed on a bipartisan basis.

Clearly, Heisler said, the Legislature did not want the state to get into the business of automobile insurance. New Jersey had had experience with state-established joint underwriting associations in the 1980s and the early 1990s, and legislators "felt that the market solution would be best served by competition among companies, companies wanting to do business, and that it takes time," said Heisler, who is now the association's government affairs representative.

The bill, signed in June 2003, was a massive 99 pages long, and most of the regulations to implement its many parts were adopted only in early 2004. But two major carriers have been quick to jump into the New Jersey market, increasing the choices available to consumers. Mercury Insurance Co., an independent agent company, announced it would come in as the bill was being signed and began writing business in August 2003, Heisler said. Geico also has entered the market. Progressive is considering doing business in New Jersey and the association is hopeful that many other companies will study this, too, she said.

"It looks like it's working because companies are looking at New Jersey in a whole different light and companies that are staying here are looking to expand and grow" Heisler said. "If that's the case, then agents will benefit from it because our biggest problem was we did not have products to sell because there were so few companies left."

Consumers stand to be big beneficiaries of the changed market and Heisler thinks they will be very satisfied in the long run. "Good drivers will have an opportunity to really shop for insurance and secure a very competitive rate," she said. "Those are things they didn't have before."

Praise for Reform

In September 2004, the American Insurance Association issued a statement praising New Jersey legislators, regulators and the governor's office for "actively combating the factors, under its control, which have resulted in the state ranking No. 1 on the National Association of Insurance Commissioners' annual auto-insurance premium survey."

The AIA pointed out that since Gov. McGreevey signed the auto-reform bill in June 2003, many drivers who once had trouble getting a policy now can be insured in one day. About 33,000 previously uninsured drivers have some level of coverage now and efforts to combat fraud have intensified, said the AIA, which represents more than 450 major property/casualty companies.

Honors also went to the New Jersey agents' association in April 2004 as their national organization, the Independent Insurance Agents & Brokers, awarded them the Maurice G. Herndon National Legislative Award for their outstanding government affairs achievements in lobbying for the auto insurance reform package in 2003. "Through their contributions, New Jersey agents have protected their business interests and the future of the agency system in their state," the IIAB said in a statement.

The IIAB of New Jersey represents about 700 independent agencies that employ more than 10,000 people in the Garden State. The group, which is constantly monitoring legislative activity in the state capital of Trenton, has concerns about some pending efforts, Heisler said.

"Some bills pretty much gut out the verbal threshold as we have it today," she said, explaining that this could increase the number of lawsuits in the state, putting pressure on rates to rise. Then, if legislators began suppressing rates, it would lead New Jersey back into the availability quagmire, Heisler said.

The association is asking legislators not to take action on these bills, but to let the auto reform measure take full effect over the next couple of years. "Our main concern right now is to have the Legislature allow this bill to work," Heisler said.

Mississippi: Tort Reform Action

Agents in Mississippi played a significant role in winning legislative approval for a tort reform package in May 2004. The Independent Insurance Agents of Mississippi was one of the founding groups of Mississippians for Economic Progress, a large coalition of more than 50 locally based trade, professional and medical associations, independent businesses and individuals. The coalition took shape in the summer of 2001 with the goal of improving Mississippi's civil justice system which, coalition members felt, was a serious obstacle to economic growth and was hurting insurance availability.

"These were business people, manufacturers, insurers who said, 'We can't operate in Mississippi without tort reform'--they were being handcuffed," said Ray Dixon, president of the Independent Insurance Agents of Mississippi. The state had had a conservative Supreme Court in the early 1990s, but that changed as evidenced by the big settlements that were not overturned, in asbestos and tobacco cases, he said. Before long, Mississippi gained a national reputation as a lawsuit mecca.

Coalition leaders soon developed a legislative package and worked to elect candidates they considered fair-minded to the bench. "We had to make sure the [state] Supreme Court and other courts were balanced, so tort reform would not be thrown out the window," Dixon said. They also worked to get Republican Haley Barbour, a staunch supporter of tort reform, elected as governor in 2003.

"Insurance agents and small insurance companies are quite possibly one of the best grass-roots, street-level advocacy groups that tort-reform coalitions can tap into," said Steve Browning, the coalition director. "They're everywhere; there are thousands of insurance agents, especially the independent agents. There's an independent insurance agent on almost every street corner in every town in Mississippi. It's pretty tough to beat a coalition that has insurance agents involved."

Dixon, who is with Bottrell Insurance Agency in Jackson, said independent agents were urged to put the coalition's tort reform posters and flyers in their offices and, when customers came in, tell them how important it was to get the legislation passed.

Besides dealing with the public, Mississippi agents often are in frequent contact with their state legislators, Browning noted. "I would rank them right up there with your local Farm Bureau federations as well as your Realtor associations," he said. "Just sheer numbers wise, they are so powerful."

The Mississippi coalition was modeled after the highly successful Alabama Civil Justice Reform Committee in Montgomery, which led tort reform efforts in Alabama in the 1990s. A Mississippi delegation of association and business leaders traveled to Montgomery in 2001 and spoke with committee leaders to gain ideas for establishing a similar organization in their state.

Back at their Jackson base, they first built up their membership from about 20 groups to more than 50. "We wanted to grow that number because we knew if we got more trade and professional and medical associations on board as members, through their contacts we would be able to reach more business people throughout the state," Browning said. Then the coalition made contact with key policymakers in the state legislature. There were frequent trips to the state capital, and meetings with committee members, committee chairmen, rank-and-file members and leaders of the state House and Senate, as well as the governor's office.

The coalition knew that it had the strong backing of Gov. Haley Barbour, Lt. Gov. Amy Tuck, the state Senate leadership and about two-thirds of the state Senate. But it met opposition in the House. "Once we started investigating heavily at the beginning of the regular session in January, we realized there was significant support for tort reform on the floor of the House," Browning said. "Our lone resistance was in the House leadership--the House speaker and the House Judiciary A committee chairman were opposed to our efforts." The House Judiciary A committee chairman, a personal injury attorney, had a long history of opposing tort reform legislation, as did the speaker, he said.

But the coalition kept its advocacy efforts alive, asking members to call their representatives during key moments in the legislative process to advocate support of this legislation. "It was a simple matter of just keeping the issue out there and not giving up. Persistence won the day," Browning said.

A determined Barbour called a special session of the Mississippi Legislature after lawmakers failed to act on the bill in regular session. "There are a lot of trial lawyers in the Legislature," Dixon said. The tort-reform package finally passed, was signed by Barbour on June 16, 2004, and went into effect on Sept. 1, 2004. "Is it a perfect bill? No. But compared to where we were and what we have accomplished, it's a very good piece of legislation," Dixon said. "This is something other states can't believe we did. You talk about a political hot potato, it's tort reform."

The new law promises to create limits on noneconomic damage awards ($500,000 for the medical community and $1 million for all other industries); create limits on punitive damage awards for medium and small businesses; reform Mississippi's venue statutes; protect innocent retailers from frivolous litigation; and eliminate joint liability.

The coalition has become a fount of information for other reform-minded parties. "Quite possibly the most complimentary thing to not only our organization, but also our sister organization in Alabama, is that other groups from other states are coming to Mississippi now to hear about our success and to try to model their structure after our own," Browning said.

One of the primary goals of Mississippi's independent agents this year is to attract more insurers to the state market and to encourage carriers already there to enhance their business. Increasing the number of insurance companies in the state will be proof positive that tort reform works, Dixon said. "There's some skepticism," he said. "Some companies have taken a wait-and-see attitude, asking is this going to work?"

The association has formed a joint task force from among its 228 member agencies, and this group has made a list of 10 qualified companies it would like to see enter the Mississippi market. "We will identify the positive things about tort reform and take that to the CEOs," Dixon said. "We'll say 'Mississippi is open for business and we'd like you to come in.'"

Key Points

* An availability crisis spurred New Jersey independent agents to work for passage of landmark auto insurance reform legislation.

* Agents in Mississippi played a significant role in winning legislative approval for a tort reform package in May 2004.

* To counter what they see as a biased Ohio Supreme Court, independent agents in the Buckeye State have been actively involved in their state's Supreme Court elections.

* Louisiana agents pushed an aggressive legislative agenda, including much-needed property insurance legislation, and won on every front in 2003.

Ohio: Election Activism

Independent agents in Ohio have been actively involved in their state's Supreme Court elections. In the campaign leading up to the November balloting, the Independent Insurance Agents Association of Ohio had endorsed three candidates and was working to help them win on Nov. 2. The three include Thomas Moyer, Ohio Supreme Court chief Justice up for re-election, appointee Terrence O'Donnell, running for a full term, and Judith Ann Lanzinger, currently serving on Ohio's Sixth District Court of Appeals.

This election period has been intense but not as acrimonious as the one in 2000, which turned out to be a draw between the interests of the association and the greater business community and those of the trial bar and labor--the classic confrontation, said Thomas Hardy, chief executive officer of the association.

This year, the association recognized the opportunity with the three contested races "to change the philosophy of the court from a 4-3 anti-business bias to a 5-2 pro-business, and we'd like to think pro-business/citizens, bias," Hardy said.

To that end, the organization's political action committee contributed the maximum amount allowable by law to each candidate and promoted the argument of separation of powers. It also encouraged members to "carry the need for balance and pragmatism on the court to their communities," Hardy said.

Legislating From the Bench

In the 2002 election, the activism of Ohio's top court was a major issue, he said. "There was a contentious situation between the Ohio General Assembly and the court,' Hardy said. "By consistent votes of 4-3--the same four, the same three--the judges were actually legislating from the bench on insurance issues. It was difficult for us in the industry because we were dealing with the situation of the legislature passing laws and the court consistently finding those laws unconstitutional. And the legislature would pass other laws to repair that decision and they were declared unconstitutional."

Several of the bills in question dealt with uninsured and underinsured motorists coverage and to whom it was extended. Because of the court's interpretation of policies, particularly in the commercial auto area, Ohio experienced a crisis in commercial auto for a short time, with major national carriers resisting the writing of new policies and some carriers withdrawing from commercial auto altogether. "It was tough on the market, not just the business market,' Hardy said. "I know that there was one hospital that had 31 vehicles and could not find commercial auto cover age. That definitely is an undesirable situation."

The association has sponsored or promoted the introduction of bills on liquidation and bankruptcy that sought specific changes to benefit agents. These measures dealt with voidable preferences in bankruptcy law. Like federal bankruptcy law, Ohio's bankruptcy and liquidation laws allow a liquidator to recoup monies paid by the entity being liquidated for creditors with whom it has incurred debt in the year prior to the liquidation process. But in the view of an Ohio insurance superintendent, agents' commissions fell under the heading of voidable preferences. As a result, the courts were requiring agents to return commissions paid in the year prior to the liquidation process at these insurance companies. "That could be significant" Hardy said. "That's like having to give your paycheck back."

The Ohio agents group was able to have the law changed to say that commissions were monies paid in the normal course of business and therefore were not voidable preferences, he said. In this instance, only some small companies were being liquidated. But Hardy shudders to think what would have happened if a large insurer had gone into liquidation under the original interpretation of voidable preferences. "Imagine the impact that could have on the entire distribution system if there were a liquidation," he said. "It'd be disastrous. So that was very important legislation."

Advocacy in Ohio and national politics is the association's top priority, Hardy said. "We're primarily a lobbying organization representing the interests of, first and foremost, the independent insurance agent, as well as the insurance industry," he said.

The association has about 800 agencies as members, and that adds up to 6,000 to 10,000 individuals, a fluid number because of mobility, attrition and other issues, Hardy said. "We tend to have the larger agencies in the state," he said. "That's been consistent since our founding in 1897."

Louisiana: Far-reaching Reforms

The year 2003 was a banner year for the Independent Insurance Agents of Louisiana Inc. Every initiative they had targeted for action won their state Legislature's approval and was signed into law.

"We had an aggressive agenda--a Flex Band Rating System, a Citizens Property Corporation Referendum, credit scoring, plus several other bills," said Jeff Albright, chief executive officer of the association. "We asked our agents to help make this happen with legislators. It was a phenomenal grass-roots groundswell that legislators responded to. The success really rests on our agents."

During Louisiana's 2003 Legislative session, the association put lawmakers' contact information on its Web site. "We sent over 21,000 e-mails to legislators in 90 days," said Albright, whose organization has 387 member agencies, representing more than 3,500 insurance agents and their staffs.

The opposition didn't stand a chance, he said. "Frankly, it was a matter of outmuscling them with our agents' efforts" he said. "No one was able to muster the amount of grassroots support that we did. When your livelihood is at stake, that motivates you--they were just not as motivated."

After devastating Hurricane Andrew in 1992, Louisiana's residual property program grew rapidly, and homeowners insurers grew wary of their assessment exposure. Many decided their only recourse was to pull out of the state. As a remedy, Louisiana revamped its residual market FAIR (Fair Access to Insurance Requirements) and Coastal Plans in 2003. Under the new arrangement, the funding of these plans shifts from insurers to policyholders, making property insurance more attractive to insurers.

Members of the Louisiana association had traveled to Florida to study its popular Citizens Property Insurance Corp. as well as its Hurricane Catastrophe Fund, Albright said. Back at home, Louisiana's agents initiated and won legislative approval for the Louisiana Citizens Property Corp. According to the association, Citizens holds tax-qualified loss reserves, manages the potential catastrophe exposure to the organization, insurers and policyholders, establishes tax-qualified bonds and other debt instruments to finance catastrophe losses over time, and establishes a statutorily guaranteed right for insurers to pass through catastrophe loss assessment to policyholders.

"This limits assessments that insurance companies have from the FAIR and Coastal Plans," Albright said. "So now they can come to Louisiana and write homeowners and don't have to worry about secondary risk regarding the residual marketplace."

The homeowners market is the single biggest need now for Louisiana's insurance industry, Albright said: With the recent legislative and regulatory changes, seven new homeowners carriers that have never done business in Louisiana have decided to enter the market, he said.

The rest of the association's legislative juggernaut included:

* A Flex Band Rating System which allows insurers to file rate changes of up to 10% on a 30-day, file-and-use basis with the Louisiana Department of Insurance. "This system will provide insurers with timely rate adjustments as they respond to changing market conditions," the association said.

* A No-Pay- No-Play statute which bars recovery for the first $10,000 of liability claims by uninsured motorists. The association says that this statute has significantly reduced the number of uninsured motorists along with reducing insurer payments.

* Fraud enforcement. The Louisiana Legislature created an interagency insurance task force involving state police, the attorney general's office and the department of insurance to toughen the enforcement of fraud statutes.

A New Day, A New System

Before 2003, Albright said he felt a bit embarrassed to go to national meetings of independent agents and say he was from Louisiana. Now, when people at those meetings learn where he hails from, they tell him they have heard about the dramatic changes in his state and can't believe "how we accomplished that in such a short period of time," he said.

The association gives much credit for recent reforms to Insurance Commissioner Robert Wooley, whom the group actively supported in the insurance commissioner's race, Albright said. "But a lot of political muscle to get these reforms done came from agents because they are the grass-roots activists in the state," Albright said. "It's not so much political clout from supporting people in the election, it's more trust and expertise. Legislators were looking for someone to trust, who has expertise in the industry. Legislators know local agents personally--they're constituents, friends and neighbors. When agents explain why we need to deregulate, they listen."

This year, 2004, the Independent Insurance Agents of Louisiana also helped influence passage of commercial rate deregulation. "We don't have many regional carriers--most of the insurance companies writing in our state are the large carriers," Albright said. "There's a need for additional insurance companies in rural areas. That's part of the reason for our effort."