Senate committee advances insurance-code revisions; rebating, crop-insurance carve-outs and arbitration among changes
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Summary
The committee approved a package of amendments to Senate Bill 2374 that adjust rebating rules, carve out federal crop insurance, set a 12‑month limit on reopening supplemental claims, and continue negotiations on arbitration for surplus lines; the bill was reported out with a due-pass recommendation.
The Senate Industry and Business Committee voted to advance Senate Bill 2374 as amended after lengthy testimony from the North Dakota Insurance Department and industry representatives about rebating, federal crop insurance and other market provisions.
The committee adopted a multi-part amendment package that: removes specified provisions that the Insurance Department said might affect NAIC accreditation; carves federal crop insurance out of the state’s rebating rules; accepts industry-proposed language limiting reopening of claims to 12 months for supplemental claims; and continues to negotiate arbitration language for surplus lines policies so arbitration would apply only where the entire risk is in North Dakota. Committee members also agreed to remove language concerning “purchasing groups” that department staff said could conflict with federal law.
Johannes Palsgraf, general counsel for the North Dakota Insurance Department, described the package as the product of discussions with industry and staff. “Federal crop insurance is a very standard… cookie cutter product,” Palsgraf said, arguing that rebating concerns for crop insurance depend on incentives agents give customers rather than differences in the underlying federal policy. Palsgraf also told the committee the department retained an exception allowing promotional items up to $100 for all lines and that administrative penalties for rebating can run up to $10,000 for a violation.
Insurance Commissioner John Godfrey told the committee the department presented the amendments to address market concerns and noted the package gives the Legislature options on how to handle rebating for large commercial risks. “We’ll happily support whatever you decide to do,” Godfrey said, describing the options as either tightening the definition of “large commercial risk,” banning rebating for certain lines such as federal crop insurance, or keeping current limits.
Steve Becker, executive director of Professional Insurance Agents of North Dakota, spoke for independent agents and said his group supports most department amendments but opposed creating a carve-out permitting rebating for selected commercial customers. Becker said rebating is a consumer-protection issue that can skew competition and that the association does not favor allowing agents to offer rebates to any subset of customers.
The committee approved the combined amendment package on a roll-call vote and then voted to give the bill a due-pass recommendation to the full Senate. The amendment vote and the final due-pass recommendation were both recorded as favorable and will be reflected in the committee report.
Committee members indicated they will continue working with the department and industry on the arbitration language for surplus lines and on technical cleanups before the bill moves to the next stage.