What happened to the time when a significant insurance coverage decision arrived and everybody in my line of work analyzed that topic for several years? Now, the insurance industry is writing so many new and differently worded forms, it is hard to rely upon case decisions as being of widespread significance. If a case decision is made which insurance companies want to avoid, they re-write the policy or the insurance industry lobbies legislators to change the statutory law "gaming" the insurance business to outcomes predetermined in the insurer’s favor. Accordingly, I spend more time researching trends of politics. I also review insurance trade journals to contemplate how my policyholder clients may be impacted.
New York is losing a very fine insurance regulator. Eric Dinallo is resigning. Earlier this week, I posted a video clip which shows how eloquently he has stood up against the Federal Charter proposal in New York Insurance Superintendent Says Creating an Optional Federal Insurance Regulator Will Erode Consumer Protections. Sam Friedman, an editor of the National Underwriter, mentioned that Dinallo is a respected insurance commissioner and will be missed:
"In case you forgot all that Mr. Dinallo accomplished during his relatively brief time in office, check out his record:
–He was a key player at the table, along with then-Gov. Spitzer, in convincing seven carriers to end six years of acrimonious litigation and pay some $2 billion to settle all remaining claims from the World Trade Center’s developer.
–He helped formulate and push through a long overdue workers’ comp reform measure that was hailed by insurers and employers alike–no surprise, being that Mr. Dinallo was able to authorize a 20.5 percent rate cut, despite raising injured worker benefits for the first time in over a decade.
–He also was very influential in leading the way towards reform of the reinsurance collateral system, helping drive NAIC action by moving to unilaterally do away with the standard 100 percent of liabilities collateral requirement imposed on foreign reinsurers, and replacing it with a sliding scale based on a carrier’s capitalization and standing.
–Meanwhile, even though his old boss, Mr. Spitzer, made a name for himself in part by exposing shameless bid-rigging and contingency fee abuse by major brokers and carriers, Mr. Dinallo did not rush to judgment on the entire producer community. His efforts to encourage disclosure of agent and broker compensation has been rational and open-minded.
–Despite being a state regulator, he did not dismiss the notion of federal oversight out of hand. Instead of a knee-jerk reaction, he offered a thoughtful critique of the insurance regulatory system.
Yes, he reminded everyone repeatedly that state oversight was not to blame for the debacle at AIG (which was undermined by its unregulated Financial Products unit, while its state-supervised insurance subsidiaries remained sound and fire-walled off from the rest of the organization’s toxic holdings).But while he conceded that a national systemic regulator might be needed, he warned strongly against any “optional” federal chartering, arguing that giving players the choice of referee would eventually ruin the game for all."
Sometimes, those in the insurance industry write and complain that I am unfairly criticizing the industry. Possibly true because my allegiance is to the policyholder and with that perspective. Yet, there is a need for thoughtful criticism of insurance, how it works and how it should work for society’s benefit because unlike other forms of business, insurance is a social commercial product. It is not, and never has been, a business thought of as others in a "free market" sense. We need thoughtful regulators that will fairly balance competing financial interests of insurers with the needs of the consumers and society.
Florida Governor Charlie Crist is a wonderful public servant because he is very thoughtful. However, this trait makes it difficult to predict what he may do when faced with the possibility of a veto. While he has hinted he may, Crist still has not vetoed the insurance bill deregulating big insurance from rate making. As noted in the South Florida Business Journal, consumer organizations are worried:
"The Consumer Federation of the Southeast and Florida Public Interest Research Group claim HB 1171 would pit the largest insurers against the smallest, which would be hamstrung by regulation.
But, during a Wednesday news conference, Brad Ashwell, legislative advocate for Florida PIRG, said the answer is not deregulation of all companies. He said that rates need to more closely conform to real risk, and that keeping rates artificially low, as Citizens Property Insurance Corp. did for several years, is not the answer.
Walter Dartland, the consumer federation’s executive director, emphasized that partial or complete deregulation is not the answer, either. He maintains that the state’s rate review process has been a valuable consumer protection tool against arbitrary rate increases.
A practical solution would need to involve a deeper pool of insurers, specifically smaller ones, and higher rates that are regulated, Ashwell said.
“Florida is in the midst of an economic crisis, and our residents cannot afford to be caught in a volatile insurance market faced with erratic rate increases," he said.
But, the insured also have to be realistic about the impact a hurricane would have on them. Floridians will not be able to avoid assessments.
“It’s just a question of how big the assessment will be,” Ashwell said.
The bill awaiting Crist’s signature would allow major carriers, such as State Farm, which earlier this year said it would leave Florida, to raise rates unchecked without a guarantee that they would continue writing policies in the state.
Dartland said his organization would encourage State Farm and others to poach the customers with the least risk, leaving those with the most for companies that are least capable of paying out in the event of a storm.
“This doesn’t help anybody except the few companies that are involved,” he argued."
While waiting on Crist’s decision in Florida, Texas TWIA politics is getting more frustrating to observe by the day. In my post yesterday, TWIA Bill Moves Along in Bizarre Manner, I noted how the Texas Senate literally pulled the plug on the Senate clock to get legislation passed within the time allowed. The Southeast Texas Record noted the following:
"The state Capitol has been a colorful place the past few weeks, with lawmakers resorting to stalling tactics one day and marathon approval sessions the next. The Senate managed to suspend time to avoid a deadline, and late into one night Senators could be heard crowing like roosters to cast their vote on a cockfighting bill."
These are the people Texans have to trust to make thoughtful decisions on laws to be followed. The article, "Hundreds of Bills in Limbo as End of Texas Legislative Session Looms," also mentioned that the TWIA legislation is mired in limbo as well. We’ll keep you posted.
