One-on-one interviews with 15 insurance regulators

One-on-one interviews with 15 insurance regulators
At a recent meeting of the National Association of Insurance Commissioners, Insurance Journal sat down with 15 insurance regulators to talk about issues affecting their state insurance markets, as well as industry-wide concerns. Regulators addressed their viewpoints on issues ranging from agency compensation and disclosure, to federal terrorism insurance and even a possible national catastrophe plan. Several shared their views on the independent agency system, and even whether or not they believed a state-appointed or elected insurance regulator was best for the insurance industry.

Part 1 of this two part series, interviewed regulators from Alabama, Colorado, District of Columbia, Georgia, Kansas, Kentucky, Mississippi, Missouri, Montana, Nebraska, New Mexico, New York, North Dakota, Texas and West Virginia.

Insurance Journal’s exclusive “Commissioner’s Series, Part 1” interviews will be released online and in print over the coming weeks. To view the complete, unedited video interviews visit Insurance Journal’s Web site at www.insurancejournal.com and go to the video features section.

Alabama — Walter Bell
Newly elected president of the National Association of Insurance Commissioners, Walter Bell, also Alabama’s insurance commissioner, says state-based insurance regulation is at a “crossroads.” One of his first priorities for the NAIC as he enters office is to develop and implement a strategic plan that will map out where the association wants to go and how it will get there.

Bell says the NAIC’s strategic plan should include a way for the organization to evaluate itself on a quarterly basis to make sure it is reaching its goals. “Are we making sure we are modernizing the system as fast as we can? Are we getting all of the inefficiencies out of the system as fast as we can?” he asked. Bell believes a strategic plan will help the association get to where it needs to be.

Bell also said he is in favor of full disclosure of compensation in all aspects of the insurance business. “It’s dealing with the public; there’s a public trust, there’s a promise that what you say is going to happen … is going to happen. So, yes, if agents and producers get on the outside of our regulations then, we should be involved in it.”

While Bell believes some state and federal involvement in regulation and enforcement may be warranted, he firmly believes in the capabilities and experience of the private market when it comes to guiding important insurance issues.

“My personal bias is that whenever we can keep the government out of the business of insurance, we should do that,” Bell said.

Montana — John Morrison
The hallmarks of John Morrison’s legacy as Montana State Auditor, the Commissioner of Insurance and Securities, is to help provide more affordable coverage.

For example, the state is one of the leading captive domiciles in the West and is “bullish” on attracting more captives so groups can secure lower premiums, he said. Morrison is working to provide affordable homeowners insurance despite the state’s seismically active conditions and frequent forest fires. And, the state has made strides in providing more health coverage.

One in five Montanans do not have health insurance, which costs all businesses and residents money; when the uninsured get sick, the illness is likely to be more severe, and others have to pick up the tab, Morrison explained. Thus, he helped to create Insure Montana, which is being hailed by the NAIC as a model for other states. The program uses tax credits and pooling to make health insurance more affordable for small businesses.

“Half of the uninsured work for small businesses with fewer than 10 employees that [prior to 2005] didn’t have the resources to provide employees with insurance,” he said. The tax credits for small businesses and state chartered purchasing pools are now helping to provide coverage for 10,000 people.

Colorado — David Rivera
When David Rivera was appointed to be Colorado’s state insurance commissioner two years ago, he was the youngest insurance person to serve in that position at age 34. While he is handing the reins over to Marcy Morrison, a Republican appointed by newly elected Gov. Bill Ritter, he has some sage words to share with the insurance industry and the incoming regulator.

Primarily, he recommended the new commissioner continue to provide consumers with choices. Rivera helped the state to transition from a no-fault auto insurance system to a tort system, and is a strong believer in providing consumers with insurance options. He also served during a time when voters in the state passed an ethics in government bill. Those events are in keeping with the mission of the commissioner to protect consumers, he said.

Rivera advised that protecting consumers requires a delicate balance of regulations. Consumers need to be informed, to have the available information and to be educated. Then, they can make educated decisions, he indicated.

While providing that consumer choice and information, regulation needs to be such that it encourages companies to participate in the marketplace, he added. After all, if companies are deterred from doing business in the state, that situation will leave customers with no insurance options to choose from, and subsequently, consumers won’t be able to make good purchasing decisions.

District of Columbia — Thomas Hampton
Federal regulation of banking and securities works fairly well, but translating that model to insurance would be a real challenge given the “parochial” nature of state insurance coverage mandates and laws, according to Thomas Hampton, commissioner of the District of Columbia Department of Securities, Insurance and Banking. “You can’t have ‘one rate or policy form fits all’ in insurance,” he said.

Hampton, who was reappointed to his post by Mayor Adrian M. Fenty in January, reported that the District’s campaign to attract captive insurers has seen a “growth spurt” to 70 entities since it switched from targeting association-backed captives to hospital and liability risks. The District now is going after medium-sized firms with $50 million to $100 million in capitalization.

Renewal of the federal terrorism reinsurance program is “very, very important” for the District, but a similar federal backup for natural disasters would probably be unfair to the Midwest, he offered.

His department supports the use of credit scoring by insurers in developing rate classifications. “If you take out credit scoring, there will be less rating classes and more people would be paying higher rates,” he explained. However, Hampton said he will be conducting a market analysis to verify that this practice is not unfairly discriminatory, as insurers claim.

Georgia — John Oxendine
Commissioner John Oxendine hopes to set Georgia’s coast apart from its neighboring coastal states, and says he is wrestling with some insurers that are trying to put “big insurance loads” on the Georgia’s homeowners market.

Oxendine has resisted actions he feels reinsurers are trying to impose on Georgia based on hurricane activity in states like Florida and the Carolinas.

“That’s something that we think is very inappropriate,” he said. “We’ve made companies actually absorb some of that or put that risk on other states.”

Oxendine also shuns hurricane models being used in other hurricane-prone states. He said Georgia has been fortunate to have maintained a good competitive market on its coast.

“We don’t have the historical problems that a lot of other states have, therefore we only allow companies to use historical data in rating information,” Oxendine said. “We do have a wind pool, but we have kept the population of it low.”

Recently reelected to a historic fourth consecutive term, Oxendine has also championed a rural health care initiative, saying his state has “great doctors” but lacks specialists in sparsely populated regions.

Oxendine encourages independent agents to join professional associations. He said he considers the opinions of independent agents when writing regulations, but gives them more credence if they belong to certified organizations.

Kansas — Sandy Praeger
Insurance Commissioner Sandy Praeger is a seasoned player now going into her fifth year leading the Kansas Insurance Department. She was elected in 2002 to her first term as Commissioner of Insurance, and was recently re-elected in November 2006 to her second term. As the Kansas commissioner she oversees nearly 1,700 insurance companies and 65,000 agents in her state.

Married to a Lawrence, Kan., physician, she has always taken the lead on health issues not only in her own state, but at the National Association of Insurance Commissioners (NAIC) where she has been chair of the Health Insurance and Managed Chair (B) Committee. Now in a leadership role as president-elect of the NAIC and unable to chair a standing committee, she continues her work in the health area on a NAIC working group that targets long-term care.

In addition to grappling with catastrophe issues common to the Midwest, including a series of devastating winter storms that caused more than $360 million in damage, Praeger has strong views and displays leadership on a variety of issues including national catastrophe proposals, uninsured motorists, contingent commissions, rating issues, credit scoring and more.

Kentucky — Julie Mix McPeak
Julie Mix McPeak cares about the health insurance crisis facing small businesses in Kentucky and in response to the problem she helped to implement the “I-CARE” initiative.

About 90 percent of businesses in Kentucky qualify as small businesses and the program stipulates that the state reimburse employers a certain amount per employee based on the coverage. A high cost condition in the group would trigger a higher reimbursement, McPeak said.

With “firm but flexible regulation,” McPeak says her state also has much to offer captives.

“We’re proud to say that we have about eight captives approved in the state right now, but we have probably twice that many applications in various stages of completeness,” McPeak said.

In regard to recent contingent commission debates, McPeak said she is not opposed to agents disclosing to consumers what they might be paid for a certain transaction.

“I always have a concern that we are fair and reasonable to the agent and are not asking for something that is extraordinary or difficult for them to comply with,” she said. If appropriately disclosed and appropriately administered, McPeak said she is not opposed to the idea of contingent commissions, and believes they should not be “banned outright.”

Mississippi — George Dale
Hurricane Katrina adversely affected Mississippi in many ways and Insurance Commissioner George Dale has been at center stage throughout the recovery process. Since the catastrophe, Dale has maintained that his top two responsibilities are to “get as many clients paid as we could, and be sure there is a market when our coast begins to rebuild.” After insurers paid $11.8 billion for 440,000 claims, his agency began performing a “market conduct exam” to determine how they have treated their customers, and whether there has been any fraudulent activity.

While Dale approves of the election versus appointment of insurance commissioners, he said the major weakness of the election process is that campaigns have become too expensive.

“It was never the intention of the writers of our Constitution to limit the person eligible to serve in public office based on his wealth or his ability to raise money,” he said. The longest tenured commissioner in the country, Dale has announced that he will run for reelection in 2008.

Dale believes that federal regulation of the insurance industry is not particularly a good idea.

“I just think that the state regulation of insurance, with all of its warts, is closer to the consumer than some type of federal insurance czar would be to our people,” he said.

Missouri — Dale Finke
Dale Finke, who recently retired, led the Missouri Department of Insurance, Financial Institutions and Professional Registration with honor during a time of transition, Gov. Matt Blunt said. Finke led the department over the last two years. During his tenure the governor ordered a consolidation of the Department of Insurance with the Department of Economic Development’s Divisions of Finance, Credit Unions, State Banking Board and Professional Registration. The governor credited Finke with the project and praised the efficiency of the new structure.

In his interview with Insurance Journal, former Director Finke said that earthquake insurance affordability continues to be a grave concern since Missouri sits directly on the New Madrid fault line.

The director expressed concern that the public is not buying the coverage and companies are not adequately reserving. He said the line is profitable only because there has been no event and that could foster a false sense of security.

Finke says contingent commissions for agents should be allowed and agents should be compensated fairly. “Agents are the backbone of the industry,” he said.

He also said that Missouri hopes to pursue a regulatory modernization rating bill in the 2007 session, adding that the proposal failed last year.

Nebraska — L. Tim Wagner
Insurance Commissioner L. Tim Wagner has spent close to 40 years in the insurance industry, the last nine as the appointed Nebraska regulator. He takes his role seriously and believes the insurance industry has a real impact on the economy and therefore has a real political voice and a responsibility to use it.

As chair of the National Association of Insurance Commissioner’s (NAIC) Climate and Global Warming Task Force, Wagner believes that the industry should be a leader in taking action to alert the public about climate warming and the dangers of carbon dioxide.

Another top concern in Nebraska is the dispute between body shop owners and insurers. Wagner describes the debate as contentious and says as a regulator he feels an obligation to help resolve it so that consumers don’t feel the brunt of higher premiums because of the tug and pull between the industry and body shops over discounts and referrals.

Wagner is proud of the healthy, competitive insurance market in Nebraska and says he wants to be sure it stays that way. One way to accomplish that, he says, is to help train strong leaders and experts within the insurance department.

New Mexico — Morris “Mo” Chavez
After replacing two insurance superintendents in less than a year over allegations of questionable activities, New Mexico’s Insurance Department seems to sorely need some ethics training.

The latest appointed Insurance Superintendent Morris “Mo” Chavez, hopes to do just that, restoring transparency, honesty and integrity in the office.

A licensed attorney and former regulator, Chavez shares how his administrative experience will help to move the Department of Insurance in a new direction one that can be trusted.

“In a year, I hope that we have a staff that is committed to ethics; to doing things the right way, and [by] buying into my vision [that] hopefully is going to benefit the consumers in New Mexico,” he said.

Among Chavez’s priorities is to oversee and work with the fraud ethics department, newly created by the state’s Public Regulations Commission.

“It’s important for any organization, whether you’re a state agency or a Fortune 500 company, to run your organization in an ethical manner. And I think my working with this division very closely to make sure we’re doing the business the right way is very important.”

New York — Howard Mills
Looking back on his two-year tenure, former New York Superintendent of Insurance Howard Mills says he thinks insurance actions by his own and other states’ attorneys general came about because there was a vacuum in insurance regulation, a vacuum which he hopes he has helped fill by initiating exams that look at more current risk information on insurers and adding attorneys with investigatory experience to the department.

“We hope to be able to find problems before they become full blown and avoid a lot of the collateral damage, if you will, that we’ve seen in some of these investigations in recent years,” he said.

Mills also recommended that questions about agency compensation should not be answered by regulators but instead settled by state lawmakers, who are likely to be more sensitive to the concerns of Main Street agents.

Gov. Eliot Spitzer has nominated Eric Dinallo to succeed Mills. Of the new administration, Mills said he believes it will work to strengthen insurance markets. “I think that Gov. Spitzer certainly understands the critical role of the insurance industry. I am absolutely convinced that he has every intention of doing what he needs to do to create and maintain a strong market for insurance in New York State,” Mills said.

North Dakota — Jim Poolman
Currently serving in his second term as North Dakota Insurance Commissioner, Jim Poolman has focused his efforts on working for and protecting insurance consumers across North Dakota. He previously served eight years in the North Dakota House of Representatives which he believes helps him in his role as commissioner.

In 2007, Poolman is pushing for regulatory modernization by supporting a flex rating system for personal and commercial lines insurance. He believes eliminating prior approval will increase competition and attract more companies to North Dakota.

On the issue of contingent commissions, Poolman supports the system as a valid one for agents and suggests that disclosures are not needed because many other industries use contingency commissions and the customer is not advised of what they are earning. To date, North Dakota has not passed legislation on the issue.

Commissioner Poolman has also taken an active role in the National Association of Insurance Commissioners (NAIC). He sits on the National Insurance Producer Registry Board of Directors, is chair of both the Producer Licensing Working Group and Life Insurance and Annuities Committee, and vice-chair of both the Government Affairs and the Valuation of Securities Task Forces. He believes that by participating in the NAIC, North Dakota has a stronger voice in creating and implementing insurance regulations.

Texas — Mike Geeslin
Texas Insurance Commissioner Mike Geeslin presides over one of the largest insurance markets in the nation. He began his term as commissioner in 2005, just months before Hurricane Katrina struck Louisiana, sending hundreds of thousands of its citizens across the border into Texas, followed in short order by Hurricane Rita, which plowed into both states in September 2005. The Texas Department of Insurance has been widely praised within the insurance industry and without for its rapid, efficient and caring response to those mega-disasters.

During the time it was helping with recovery efforts, TDI began to integrate into its fold the operations of the former Texas Workers’ Compensation Commission, and established the Department of Workers’ Compensation and the Office of Insurance Counsel as part of a legislative mandate to restructure the state’s workers’ compensation system.

In addition, 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.

He has had a lot to deal with.

Geeslin described the intense experiences of his less-than-two-years on the job and praised his staff for their hard work and professionalism throughout what has certainly been a difficult time.

West Virginia — Jane Cline
During a period when insurers in West Virginia limited the amount of homeowner and auto policies they were writing or stopped writing altogether Insurance Commissioner Jane L. Cline worked with the governor and the state legislature to create reform.

That was early 2005 and Cline said the action resulted in rate reductions, new product filings and insurance and civil justice reform for consumers.

Cline said the state also faced a medical liability crisis, and again in tandem with the governor and lawmakers, established a Physician’s Mutual Insurance Co. “It’s a West Virginia-based company that now insures over half of our physicians,” she said.

A 10 percent rate reduction became effective Jan. 1, according to Cline, on the heels of a 5 percent reduction in 2005.

Cline also assisted with revamping the state’s workers’ compensation system, which at its low point was responsible for discouraging new business and economic development. She said the once monopolistic fund is now privatized. Now rated under the NCCI class system, Cline said she hopes to open the workers’ comp market to other commercial carriers by July 2008.

Cline said her office maintains an open-door policy with West Virginia independent insurance agents and solicits their input prior to legislative sessions.