Christina Urias

Wildfires, captives, credit scoring, and broker compensation and disclosure have been hot topics lately especially since wildfire season in particular extends through September. But the Arizona Department of Insurance began addressing many of these issues years ago to mitigate problems before they occur. In this exclusive interview, conducted by Insurance Journal’s Andrew Simpson at the recent National Association of Insurance Commissioners’ meeting, Director of Insurance Christina Urias shared some of Arizona’s concerns, and what she’s trying to do about them.

Andy Simpson: Arizona and other western states are in the midst of wildfire season. How is your department involved in that?
Christina Urias: We have been working on the wildfire issue for about two or three years now, since I took office. We had a very serious fire, the Aspen fire in June 2003. Following that, we found an under-insurance problem in our state, across all company lines, in that the amount of dwelling coverage that individuals had was perhaps insufficient. This area had not been monitored as well by agents, brokers and the insurers themselves. So, we initiated some market conduct examinations on about 85 percent of the market, and on nine companies. The cooperation level was excellent. Companies jumped in because they recognized the problem.

[Based on the results], we’ve initiated some reforms, some best practices if you will, to get companies to re-contact their policyholders and their insureds to make sure that they have the appropriate amount of coverage. What I mean by that is re-evaluating every year. Some companies are doing it every year, some every three years depending on their volume of business, but [they are] really working to get an accurate measure on the appropriate dwelling coverage. We are starting fire season in Arizona right now, and the problem is still there.

Simpson: It sounds like it’s an audit with the policyholder.
Urias: That right, it is. It’s getting cooperation on three levels: the company level, broker level and insured level. I really appreciate you bringing that up because it’s something that I want policyholders to be cognizant of. They have some personal responsibility to check their coverage, as do the companies, using the tools that they have available to them, to make sure that the numbers that they are recommending to their policyholders are accurate and as close as can be.

Simpson: Are these best practices an NAIC initiative?
Urias: It’s really something Arizona came up with, not part of the NAIC, although I have been talking with other commissioners about what we are doing. It’s a little bit of a progressive approach. But, for the companies, it’s a win-win situation. [Because they are meeting with their customers regularly, they are] writing more business and collecting more premiums, and their policyholders and consumers are glad because they feel that their insurance coverage is appropriate.

Simpson: Arizona has been luring captive insurance organizations for about four or five years now. How is that going?
Urias: Very well. Arizona is growing as a captive domicile. We have licensed about 64 captive insurance companies in the past three or four years. Most of them are active; 58 are still active. The majority are purely for professional liability coverage, but we are seeing a variety of structures and new ideas. Arizona, with some of the other captive states, is more at the forefront on what we are developing. It can be a great mechanism, depending on the corporation and their intents. We are seeing a lot of casualty, workers’ comp, deductible reimbursement plans and variety in structure. So I am very excited with the developments.

Simpson: Other states have dealt with brokerage compensation and disclosure. What has your department done to look into that?
Urias: With the development in New York, the Spitzer investigation, with Marsh and that whole up swell of taking a closer look at contingent commissions, Arizona examined 25 domestic companies and 16 large broker firms. We sent interrogatories and received some document production. All but one of the company examinations have concluded with no findings of any inappropriate or illegal activity.

On the broker side, we still have two that remain open. We’re looking at some documents, but again, we have had no findings of brokers operating in Arizona with any kind of improper behavior. I’m very pleased with that. I have to commend the brokers, particularly because of their level of cooperation.

We are going to continue to look at it, but right now, things look as if we do not need to pursue any legislative action, because of the cooperation and the findings.

Simpson: There’s been no need for new regulations, or legislation for that matter, on compensation?
Urias: Not in Arizona. If there were findings — and that’s what I told the companies and the brokers as we’ve been meeting on this issue — is that if we find a problem, we will certainly address it. But, the level of cooperation we’ve seen … and you know, with the national scope of the whole issue, Aon, Willis, Gallagher … companies are settling.

We have joined in some of the multi-state settlements. We are still looking at the Aon issue right now. We are working cooperatively in these multi-state settlements, but also examined Arizona seriously to determine what’s going on. I am pleased to say we didn’t find any need to pursue any regulatory or legislative proposals.

Simpson: How has Arizona dealt with credit scoring and allowing insurance companies to use that?
Urias: That’s been a problem. It’s been high profile the past few years. Certain companies are not putting as much weight on credit scoring as they did in the past, but it’s still a factor, and the companies are using it. In my address to consumer groups, I emphasize that they make sure their credit report is accurate and that the CLUE report on their property is accurate, because companies are going to look at them. As far as abuses, we haven’t seen a lot of complaints of late. Certainly there are some continuing, but it speaks to the accuracy of the reporting, and we want to make sure that companies are using the appropriate information and that consumers are aware that it is a factor in their rates.

Simpson: As a border state, Arizona faces some international insurance and maybe trade issues. Have you gotten involved in NAIC on any of these issues?
Urias: I’m glad you brought that up. Arizona sits right on the Mexican border. Since I joined the department, we have participated at a higher level on the NAFTA (North American Free Trade Agreement) working group. Some of the cross transportation issues present problems, particularly with trucking and motor carriers. On the international side, I attended the NAIC International Insurance Symposium in Washington, D.C., in February where there were excellent presentations from China, India, Europe and the United Kingdom. Arizona has joined the International Solvency working group and the Accounting Principles working group, so we’re getting more involved on that scope.

With the globalization of markets, it’s something that everybody should consider. Although Arizona is not New York, not California, with the issues that are developing, particularly the reinsurance collateral issue, those things are at the forefront, so we are taking a higher profile.

Simpson: There is increasing competition among states to attract good jobs. If you were asked by an insurance CEO, “Why should I consider Arizona?” what would you say?
Urias: The regulatory environment I’ve maintained is sort of an open door policy. I have a good rapport with the carriers doing business in Arizona. We are a use and file state, and so the speed to market efforts that we have, even on producer licensing, is a matter of days for renewals. But, the ease and the transparency [are Arizona’s selling point]. With this department, we address issues right up front, and I think that companies appreciate that kind of dialogue. If there is a problem or an issue, or a particular carrier wants to change or add a line of business, we are there. We are there to discuss it, and we try to resolve problems before they become bigger than they perhaps need to be.