The Commissioners: Mike Geeslin

Geeslin has faced hurricanes, liquidations, workers’ comp overhaul

And that was just in the first year of the commissioner’s term

It could be said the first year of Mike Geeslin’s term as Texas Insurance Commissioner was one of “trial by fire.” Gov. Rick Perry appointed Geeslin to the post in June 2005, just months before Hurricanes Katrina and Rita struck the Texas and Louisiana coasts in August and September of that year.

Geeslin, who had served as Deputy Commissioner for Policy at the Texas Department of Insurance since 2003, found himself not only faced with presiding over one of the largest insurance markets in the nation, but directing recovery efforts in Texas for both hurricanes, as well. In addition, a complete overhaul of the state’s workers’ compensation system was initiated in September 2005. Then, less than a year after the hurricane catastrophes, Geeslin was faced with placing one of Texas’ largest homeowners insurers, Vesta Texas Select, into rehabilitation and then liquidation.

In an interview with Insurance Journal’s Stephanie Jones, which took place at the winter meeting of the National Association of Insurance Commissioners in San Antonio, Geeslin discussed those experiences, along with some of the issues likely to be addressed in the 2007 session of the Texas Legislature.

During your term as commissioner, what have been some of the greatest challenges you have faced?
Mike Geeslin: I think that anytime that you have an $80 billion a year market, there’s a certain baseline of angst and work that goes along with that. I’m very fortunate in that I’ve got some really incredible staff. Before I get into the big challenges, I need to give mention to the individuals that come to work day in and day out and help me through that.

In looking at the biggest challenges, right after I took office as insurance commissioner, Hurricane Katrina hit Louisiana. Although it didn’t hit Texas, Texas became home to over 200,000 individuals that were victims of that hurricane. We had set up operations in the disaster recovery centers to be able to help Katrina victims and then not more than a month after that, Hurricane Rita hit Texas. We just literally kicked it into overdrive since we already had people in the field.

Trying to get through the disaster response was probably one of our early challenges. Then compound that with the transformation of the workers’ compensation system in Texas. The Texas Workers’ Compensation Commission was abolished and those functions were rolled into the agency, so during hurricane season we had doubled in size, in budget, in scope, and in importance of responsibility.

When you’re talking about an injured worker … what we were faced with was having to create a system and create a paradigm, which we’re still working on, that would have to be good enough for our own flesh and blood, our own family members, our own friends. So that if they get injured on the job, we have to put them in a health care system that will get them back to work or on a suitable life course. Between hurricane response for storms that may or may not have hit Texas and implementing the workers’ compensation system, those clearly have been some of our largest challenges.

Since that time, we’ve had Vesta, which was obviously something that you try to avoid as an insurance commissioner. You don’t want that to happen on your watch but ultimately we had to take action. We’ve been fortunate to be able to have gone in, gotten information, and begin processing unearned premium refunds, and also dealing with claims that were incurred long before any sort of impairment order was [needed]. I think there was a lot to be cleaned up and we’re still working on that.

There are a lot of windstorms issues and coastal issues, especially in the property market. You recently signed an order allowing TWIA, the Texas Windstorm Insurance Association, to raise its rates. Some wanted them to be raised more. What is your assessment of the market in terms of windstorm along the coast?
Geeslin: I think if you look at the Texas experience, it’s very similar to what’s going on in other Gulf Coast states but not near as amplified. I don’t want to belittle what’s going on in Florida or in Alabama, Mississippi, or especially Louisiana. You’re seeing much of what you see in other Gulf Coast states but to a much smaller scale.

We track companies regularly to find out who’s writing both in commercial as well as personal lines property. If you’re looking at the windstorm association by itself, I think that’s a situation that’s been 20 years in the making. As insurance carriers decide to X the winds from their policies, or rather cede the wind, over time it accumulates. … It’s grown five times since its inception in terms of the level of exposure. It’s been 20 years in the making, I don’t anticipate that it will be one year in the fix.

What I’d like to emphasize is that it is going to take us several years with both rate changes as well as statutory changes to try to get some, for example, catastrophe funding mechanisms built in, both pre- and post-event, as well as address the way that the rates are actually set because the statute is very prescriptive in how to go about setting those rates.

Ultimately what you try to do as a regulator is strike a balance. Strike a balance not just with respect to the times in which you live, but for the times that lay ahead. There are going to be other economic pressures along the coast, whether it’s building expenditures or literally recovery after a storm. Having seen that firsthand and what it can do to communities, you try to think incremental changes over a long period of time. Ultimately that’s what we’re trying to do. I think the industry’s criticism is fair but I also think that we owe it to citizens to be as level headed as we can be.

What about building codes along the coast? That goes hand in hand with the rate issues.
Geeslin:That’s a good point. The way it works in Texas is if you have a policy with the windstorm insurance association you have to be certified according to the windstorm codes. Outside of that, anybody can get the policy if they meet the company’s underwriting guidelines. You don’t necessarily have to have that code certificate. I think one of the biggest issues to be decided by the legislature is, do we go beyond just the windstorm association policyholders needing an inspection to other policyholders with other insurance companies needing an inspection, as well.

One thing that we found, although we don’t have what I call an empirical engineering type study, just from field observations and photographs, we’ve been able to determine that obviously the codes work. They work exponentially better than the houses not built to code. [There can be] two houses literally just a few yards from each other, roughly the same age, and one’s standing and unfortunately one’s not.

In addition to windstorm, what other issues do you think that the legislature, as far as insurance is concerned, is going to be looking at in this session?
Geeslin: I think that there’s a lot of life and health issues, both related to suitability as well as when you look at the uninsured situation in Texas. We have five and a half million uninsured. A number of those are working for small employers. … While health insurance may not be the only answer, we have to figure out are we doing everything we can to make sure there’s a market that has enough available products and that the people know that they can go to an agent and find something that fits their employee base.

We also have a number of pilot projects that hopefully we’ll be reporting to the legislature on, again, just to provide them with more information to make some of these decisions.

What else are you communicating to legislators?
Geeslin: We’ve already talked about the windstorm situation. I think there is not one single shot fix to this. It’s not just post catastrophe bonds. I think it’s pre-event bonds, it’s post-event bonds, and it’s other means to try to build up the catastrophe trust fund and obviously loss mitigation.

Then again, obviously on the health side, trying to make sure we’re providing … information because it’s not one single fix that addresses the access-to-health issue in Texas. It’s a bunch of different fixes. What we’ve realized is that our state is so diverse, not only just in terms of our demographic and our income levels and brackets, but also on a quality of health care by region. It’s not a single shot fix.

Some of the other emerging issues that I’ll be talking about are pattern recognition and data mining. I think that as these models are being developed, and granted we’re several years out from seeing them actually being implemented on a large scale, I want to make sure that we don’t outpace our legislature. I would say the same for all states. As we move to very complex rating systems that are infinitely more complex than what we have today, and seeing what the economic impact of that is, for example disproportionate impact as well, we need to make sure that we gradually phase these things into the market to basically give the legislature a chance to step back and look at and decide it’s either acceptable or it’s not. And not have it become so wound up and engrained in the market that it can’t be unwound for economic reasons.

Workers’ comp has been a huge undertaking. How is it shaping up?
Geeslin: It’s progressing well. I’ve got to give credit to the commissioner, Albert Betts, who was the first single workers’ comp commissioner. We had a six commissioner system and now it’s gone to a sole commissioner system. He’s the first one to be named as that.

He has really carried the lion’s share of implementing that bill.

We’ve been successful in that we’ve been able to implement managed care networks in the workers’ comp arena. When people think of a PPO, for example, there has to be very extensive credentialing. There has to also be quality control measures put in. We’ve been able to get 14 networks up covering over 160 counties in this state. Hopefully we’ll have more.

I would say that on the organizational side, combining the two agencies has been a big challenge, one, because we’re not located in the same building. … When you talk about trying to blend cultures, it helps if you can be in the same building. I know that seems very simple, but it’s something that Commissioner Betts and I both recognize that needs to happen in the long run.

We’ve been able to consolidate a lot of functions and save a good deal of money, too. Our anti-fraud efforts, our enforcement efforts, obviously all of our human resources, our payroll, our budgeting and accounting, we’ve been able to consolidate. You don’t need those separate administrative systems. Hopefully we’ll be able to keep an eye and a rein on the budget.

I think probably one of the biggest challenges that we’re going to have to deal with are some of what I call the legacy issues. There are a lot of changes by House Bill 7 going forward that will fix a lot of things in the system, in dealing with the medical costs and hopefully giving employers a more viable option to cover their employees.

But looking back, what we’ve realized is there are hundreds of thousands of claims out there that have problems and disputes associated with them. It’s going back and picking up those claims that have been in existence prior to when the legislation took effect, again the legacy issues, and going through them almost one at a time to try to correct those problems. Norman Darwin, in the Office of Insurance Counsel, has been very instrumental in helping us with that as well.

What kind of feedback have you received about the work that’s been done so far?
Geeslin: Stakeholder input, when you’re talking about workers’ compensation, what you have is probably more competing interests than you do in any other policy. I want to say that everybody has been really good about coming to the table. While a lot of them have been frustrated because they didn’t necessarily get the outcome that they were looking for, from what I can sense, they’ve been pleased the dialog has been open, that they’ve been able to come face to face, and had access to department resources to be able to discuss what a particular rule does, for example, before it ever gets published and be able to walk through what the outcomes and the consequences are.

Needless to say, I think that you can never get complacent when you talk about stakeholder outreach. It is one of the things you really have to work hard at and we pride ourselves on doing that.

What are some of the things you have been most proud of in your term so far?
Geeslin: I’m most proud of the staff. They have done an incredible job. When you look at doubling in size and budget, and having to deal with two major hurricanes, and all that goes into regulating an $80 billion a year market and we’ve also been able to return over $56 million to consumers through complaints resolution. I’m most proud of staff for being able to pull that off. They had a lot placed on their plate and they accomplished it.