When the Virginia General Assembly reconvenes in Richmond Jan. 13, it could consider forcing agents to pay restitution to victims whose funds they misappropriated, as well as a number of other insurance bills.

Bob Bradshaw Jr.

“While we expect a fair amount of legislation to affect the insurance industry, we don’t see anything detrimental to insurance agents that is being proposed,” said Robert Bradshaw Jr., president and chief executive officer of the Independent Insurance Agents of Virginia (IIAV).

Insurance legislation is likely to take a back seat to budget issues during this year’s session, since the General Assembly must overcome a projected $3.6 billion state budget deficit for 2010- 2012.

Gerald Milsky, a former deputy insurance commissioner in Virginia who is now a government relations and compliance consultant with Richmond Va.-based Macaulay & Burtch, said that although he suspects legislators’ primary focus this session will be the budget, he is prepared to “react” to new insurance-related legislation being passed in Washington. Milsky, who lobbies for the National Association of Insurance and Financial Advisors in Virginia, said, “Whatever does happen will have to have some reaction on the state level.”

Restitution measure sought

The Virginia State Corporation Commission’s Bureau of Insurance is expected to ask to impose victim restitutions and new licensing requirements, according to a legislative request package. A copy of the requests was obtained by IFAwebnews.com.

When contacted by IFAwebnews.com, Kenneth Schrad, director of the division of information resources for the SCC declined to comment on any pending legislative matters.

One of the BOI’s proposed actions would be an amendment to state law, giving it authority to order restitution when agents have misappropriated funds. The SCC, which oversees the BOI, has the authority to take action against an agent’s license and to assess fines of up to $10,000, but not to impose restitution from agents accused of wrongdoing.

“It’s surprising that they don’t have that authority,” Bradshaw said.

The bill is designed to be an “important enforcement tool” for the BOI, according to its legislative package. This additional authority would mirror the authority the SCC has regarding title settlement agents, and licensees and registrants in certain securities cases.

Life license change

The BOI also has proposed legislation that would lift prerequisite licensing restrictions on nonresident agents who wish to sell variable life and variable annuity products in the state.

“In order to show the National Association of Insurance Commissioners, and ultimately Congress, that Virginia is making a good faith effort to achieve reciprocity, the proposed change … is necessary,” said Milsky.

Virginia requires nonresident agents to obtain a life and annuities license before their variable contract license, a requirement that could affect Virginia’s status as a reciprocal state for producer licensing, according to the BOI’s legislative request.

Under the Gramm-Leach Bliley Act, agents who hold a license and are in good standing in their home state must be granted a license by a nonresident state without additional requirements.

The proposal also could address the need to protect agents’ variable annuity contract licenses in the event their underlying life and annuities license was taken away.

Other legislative proposals

The Virginia Insurance CE Board wants legislators to allow continuing education course providers to appeal the CE Board’s decision to the BOI.

Under the current state code, an agent before the CE Board can appeal to the BOI, but education providers are not allowed to use the appeals process. Del. Watkins Abbitt (I-Appomattox) is set to introduce this proposal, according to Bradshaw.

The General Assembly also will be asked to make clarifications to the health insurance mandates bill it passed last year. That bill enabled insures to offer a “mandate light” version of health insurance, eliminating most of the state mandates, as a low-cost insurance option for certain small businesses in the state.

The modification sought would clarify the distinction that four state-mandated benefits – mammograms, pap smears, PSA testing and colorectal cancer screenings – must be included in all “mandate light” health plans sold to small employers as a result of this language correction. The correction to the existing bill would ensure that the requirements would be applied to these health plans, according to a BOI request.

Legislators may also see a proposal designed to make general contractors responsible for obtaining their own insurance, according to Bradshaw. Since subcontractors are responsible for having insurance to cover both themselves and the general contractor, this legislation could provide an incentive for general contractors to provide a safer worksite and encourage greater responsibility in reducing cases of negligence, added Bradshaw.

The General Assembly session ends on Mar. 14.

This story originally appeared in the January 2010 print edition of Insurance & Financial Advisor.