Committee advances insurance bill 2374 after lengthy debate over managed repair program and vendor steering

The Industry, Business and Labor Committee voted to advance bill 2374, adopting a set of insurance-industry amendments introduced by the Insurance Department and approving the bill "do pass as amended" after extended debate over a managed repair program that would let insurers offer premium reductions or other incentives in exchange for customers using approved contractors.

Deputy Insurance Commissioner John Arnold walked the committee through the department's draft amendments, explaining several significant changes. The department removed a proposed blanket prohibition on rebates tied to crop insurance and returned the bill to its original intent on that point. Arnold said the amended language also clarifies that sections 1 and 2 would not apply to "large commercial risks" and referenced the statutory definition: "a large commercial risk means an insured that has a total insured property value of $25,000,000 or more, total annual gross revenue of $50,000,000 or more, or a total premium of $100,000 or more for property insurance, ... $200,000 or more for multi payroll insurance." He said the higher thresholds were intended to exclude many farm policies from the large-commercial exemption.

On arbitration, Arnold said the amendment from the surplus-lines industry clarifies that for surplus lines policies, arbitration would occur where the surplus-lines company is based rather than in North Dakota. On surplus-lines diligent-search language, the department proposed removing strict diligent-search requirements and replacing them with a provision that a surplus-lines producer "be aware that the full amount and type of insurance is not available" in the admitted market — language Arnold said mirrors other code sections and carries professional-duty expectations.

The most contested change was Section 6, the "managed repair program," which would allow an insurer to offer a specified premium reduction or other incentive for participation in a program that steers repairs or construction work to approved vendors. Supporters — including several committee members and industry witnesses — argued the program would let insurers negotiate rates with preferred vendors and pass some savings to consumers. Opponents, including representatives of small and rural contractors and several legislators, warned it could disadvantage small-town shops, create de facto steering or rotation to a small pool of vendors and reduce consumer choice.

Committee members debated multiple possible safeguards: requiring insurers to offer both arbitration and non-arbitration policy options, limiting the pool of eligible policies, requiring prominent disclosure of program terms at point of sale, and ensuring consumers retained the ability to request an alternate contractor at the time of claim (with any price difference paid by the policyholder). Arnold said the department had tried to balance consumer protections with flexibility for insurers and noted that existing discount programs (for example, safe-driver discounts) are already filed with and reviewed by the department.

Several attempts were made to remove or substantially change Section 6. Representative Koppelman moved to exclude changes on lines 9 through 12 of page 12 (language affecting consumer choice among program contractors); Representative Casper and others urged caution on mandatory arbitration and on the managed-repair approach for homeowners policies as well as autos. A motion to remove all of Section 6 failed. The committee later adopted the Insurance Department's package of amendments.

On oversight and enforcement, Arnold told the committee the department would not review vendor pools or contracts between insurers and vendors but said the department would enforce consumer-protection provisions and could assess penalties for violations; consumer complaints would remain an enforcement pathway. He said the civil-remedy language in Section 7 pertains to litigation timing and does not prevent consumers from filing complaints with the department.

The committee approved the department's amendments and then voted to move the bill out of committee with a do-pass recommendation as amended. Motion to adopt the amendments was moved by Representative Ruby (seconded by Vice Chair Johnson). The final do-pass motion was made by Vice Chair Osterly and seconded by Representative Ruby. The committee recorded the do-pass as amended recommendation with 7 yes, 4 no and 3 recorded as other/absent on the roll.

Why it matters: The bill touches multiple insurance-market rules: rebates, surplus-lines practice, arbitration clauses, and a managed-repair program that could change how insurers and repair contractors negotiate work and how consumers select vendors after a claim. Legislators and stakeholders disagree over whether the proposed changes promote consumer choice and lower premiums or risk narrowing vendor options and consolidating work among preferred vendors.

Next steps: The committee reported the bill as "do pass as amended." Committee members signaled there may be additional floor-level or conference work ahead; Vice Chair Johnson was listed as carrying the bill forward.