Alyce Chessnoe, with a clean record as a licensed family day care provider in Fairfax County, is scrambling to find an insurance company that will cover her in the business she runs in her home.

The company that had insured her while she cared for five children there canceled that part of her homeowner's policy; other insurers say that they do not offer that type of policy or that they insure care only for up to three children. Those that even bothered to send her an application quoted rates of up to $1,260 a year for coverage that last year cost her $105.

Chessnoe, former president of the Northern Virginia Family Day Care Providers Association, was among witnesses who testified last night at a hearing of the State Corporation Commission's Insurance Bureau about the difficulties some professionals are having in getting liability coverage.

The General Assembly gave the Insurance Bureau more power this year to assess whether rates in Virginia have been established fairly, and the bureau is considering whether it should require prior approval of certain types of rates because of lack of competition. Currently, only medical malpractice and workers' compensation require prior approval.

"Virtually every segment of Virginia society is affected" by problems with liability insurance, said Steve Kaufmann, deputy insurance commissioner, at the beginning of the hearing, held at Fairfax City Hall.

A representative of the insurance industry, however, said that in most lines of general liability insurance "the crisis has abated."

"Insurance company managers in Virginia are reporting that prices are going down because of increased competition and that the normal insurance cycle is operating to reduce prices," according to testimony by the American Insurance Association. It acknowledged the continuing problems with insurance for nurse-practitioners and doctors but said free-market forces should be allowed to correct problem lines.

Nurses received word this year that the company that insured most of them was raising its rates from $58 to $553 a year for obstetrical nurses and to $1,500 for nurse-practitioners, highly trained health care providers who, the company said, in some cases basically act as doctors.

The SCC has taken the position that the insurer has to have prior approval for those rates, however, and it is still negotiating with the company, said Insurance Commissioner Steven Foster.

"Some nurses don't have any insurance and don't intend to get any," said Carola Bruflat, a Northern Virginia nurse. She said there is a nursing shortage that could be heightened if the insurance crunch is not lessened. While one company still has an affordable rate, Bruflat said, the fear is that this is temporary and that "next year there may be no affordable rates" for obstetrical nurses in Virginia.

While affordability is one concern, Foster said there is nothing the state can do if no company will offer a certain type of insurance in Virginia. "We don't have the tools to deal with that kind of thing," he commented after hearing Chess- noe's concerns about the lack of policies for day care providers. "That is a very real problem we are faced with."