Insurance department proposes broad property‑market reforms; agents and insurers raise concerns over rebating carve‑out and "large commercial" definition

The Senate Industry and Business Committee heard competing testimony on Senate Bill 23‑74, a package of property‑market reforms developed by the Insurance Department after a contracted study. Commissioner John Godfrey told the panel the bill aims to make North Dakota more competitive in a tightening market by allowing greater flexibility for large commercial policyholders, modernizing surplus lines rules, clarifying claims processes and recognizing alternative risk mechanisms such as risk retention groups (RRGs) and purchasing groups (PGs).

Why it matters: supporters say the changes will keep North Dakota businesses from being priced out of insurance markets and speed access to specialized coverages; critics warn that some provisions—most notably a proposed exemption from anti‑rebating rules for so‑called "large commercial risks"—could undermine consumer protections and be open to abuse, particularly given how the bill defines "large commercial." The committee heard multiple stakeholders urging additional drafting and higher thresholds before the bill advances.

Key proposals and department rationale: Commissioner Godfrey said the bill treats large commercial policyholders as "fundamentally different" from individual consumers because of size, bargaining power and risk‑management sophistication. Major elements outlined by the department include: - Allowing access to unauthorized (non‑admitted) insurers to improve availability of customized coverage. - Defining "large commercial risk" and exempting such entities from some consumer protection restrictions (for example, on arbitration and rebating) to permit competitive contract terms in complex, high‑value transactions. - Updating the insurance holding company system to permit certain delegation agreements (the commissioner later flagged potential NAIC accreditation concerns and proposed removing these sections pending review). - Creating legal clarity on arbitration, claims reopening and bad‑faith litigation and establishing a managed‑repair program framework. - Modernizing surplus lines rules to remove an older "diligent search" barrier, following similar changes in other states. - Clarifying recognition and treatment of risk retention groups and purchasing groups under federal law.

Support and caveats from insurers: Chris Owen of NODAC Insurance and witnesses from the Association of North Dakota Insurers said they generally support several sections—particularly those clarifying arbitration and claims handling—but urged caution on surplus lines expansion. The American Property Casualty Insurance Association (APCIA) and other national trade groups registered specific legal concerns with provisions that could impose North Dakota jurisdiction or law on multistate surplus or arbitration agreements; APCIA noted potential conflict with the Nonadmitted and Reinsurance Reform Act (NRRA) and NAIC model law principles and asked for drafting changes.

Controversy over rebating and the definition of "large commercial risk": The largest and most contested issue in testimony was a provision that would exempt "large commercial risks" from North Dakota's anti‑rebating rules. Steve Becker of Professional Insurance Agents of North Dakota and multiple independent agents said nearly every state bars general rebating for good public‑policy reasons — to prevent discriminatory pricing, market distortion and unfair competitive advantages. Becker produced draft amendments that would raise the bill’s numeric thresholds — for example, increasing the proposed $5 million property‑value threshold to $25 million, $10 million gross revenue to $50 million, and raising premium thresholds by roughly fourfold — and would carve farm and crop insurance out of the exemption; several local agents warned that currently written thresholds would include many ordinary farms, churches, apartment buildings and other non‑sophisticated buyers.

Commissioner’s response and amendments: Godfrey acknowledged the concerns, offered two technical cleanups (explicitly adding “insurance producer” to rebating language and a proposed prohibition on gifts tied to federal crop insurance customers) and said sections on holding company delegation could risk North Dakota’s NAIC accreditation; the department included an amendment proposing to remove sections 2 and 3 pending further review. Godfrey and his staff told the committee they are open to stakeholder revisions and expected more amendments before crossover.

Outcome and next steps: The committee took extensive testimony from insurers, trade groups, insurance‑market advocates and agents and closed the hearing without a vote. Multiple witnesses encouraged the department and stakeholders to continue drafting; the department circulated an appropriation amendment related to a separate incentive fund (a proposed $20 million Insurance Incentive Fund) and said it would return with additional language and stakeholder‑negotiated amendments. Committee members signaled they want clearer thresholds for any rebating carve‑out and more review of NAIC accreditation implications before taking action.

Ending note: The bill would alter several aspects of insurance regulatory practice in North Dakota; stakeholders across the industry signaled broad agreement on many reforms but urged rewrites on threshold values, rebating language and surplus‑lines jurisdictional drafting before the committee considers advancing the proposal.