The House Energy and Commerce Subcommittee looking at product liability law reform wants assurances that changes will lower insurance rates but insurers will not provide guarantees.
The subcommittee, chaired by Rep. James Florio, D-N.J., is exploring the need for a federal law in the product liability field that until now has been the province of state statutes.But congressmen emphasized Wednesday that they do not want to act if there is no link between the creation of federal product liability law and lower insurance costs.
Subcommittee staff members have been working to try to formulate a consensus product liability bill that could pass both the Commerce Committee and the House, but so far no consensus has been achieved.
The only area of agreement seems to be that any bill passed should include data collection in order to give Congress an idea of whether the changes are really affecting the situation. The insurance industry reiterated Wednesday that it opposes federal data collection.
At the hearing, Thomas A. O'Day of the Alliance of American Insurers testified that the alliance concludes that significant tort reform will make a difference on availability and cost of insurance.
But neither Mr. O'Day or Debra T. Ballen of the American Insurance Association would estimate when such changes would occur or the effect on price.
Nor would they promise advantages for consumers rather than just speculate that insurance costs and/or availability would be altered by passage of a federal law.
Rep. Matthew Rinaldo, R-N.J., summed up the dilemma of the subcommittee noting that there is a perception in the business community that changing tort law, which determines who pays for the costs of an accident involving product use,will affect insurance rates.
But the committee, he stressed, has to act on facts not perceptions and also be sensitive to opposition by consumer groups to any legislation that will limit the ability of victims to recover damages.
Rep. Al Swift, D-Wash., urged the subcommittee not to take actions that cannot be reversed in the face of evidence that will come in after a new program is put into place.
He wants the subcommittee to tie any changes in product liability law to a systematic data collection effort to track how well liability insurance rates reflect product liability reforms.
Insurers believe that tort reform is vital to controlling insurance costs, Mr. O'Day said, but he added these must be significant reforms that set definite limits on compensation and are free of regulatory interference with insurance rate-setting.
The legislation proposed by Rep. Bill Richardson, D-N.M., which is before the subcommittee, does not set a ceiling on compensation.
Mr. O'Day stressed that the insurers are taking a logical position, saying that if there is a fairer more balanced liability system, it will affect insurance availability.
Eventually there will be an effect on price, too, as competition in the industry spurs a response to lower costs, but this will take more time, he said.
Insurers are responding in good faith to make commercial insurance more available and affordable in states where comprehensive and meaningful tort reform was enacted, Mr. O'Day said.
He pointed out that these responses by individual companies are in good faith because the effect of reforms on claims cannot be ascertained until they are in place for a meaningful period of time.
Mr. O'Day cautioned the subcommittee that associations could not speak for the insurance industry when it comes to lowering rates, that this must be done by individual companies.
Each insurer management must examine its financial condition, its business mix and the base price of its insurance coverage against which reforms will be judged, he stressed.
At the same time, he said, over time, insurance prices will reflect the actual underlying costs. But legislators and regulators cannot and should not expect tort reforms to bear a one-to-one relationship with insurance prices at any given point.