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The revolving door connects insurance regulators with the supposedly regulated insurance industry | Property Insurance Law Team Blog



Yesterday’s post, Will citizens’ property insurance disputes be handled by state administrative judges?, ended with the hope that the Florida Office of Insurance Regulation would respond to citizens’ requests for approval by safeguarding the interests of policyholders. In a comment to the blog post, Mike Cappelli commented by saying that Florida’s OIR was a “rubber stamp”.

Last week, Doug Quinn of the American Policyholders’ Association gave a speech in which he addressed the issue that many state insurance regulators are simply in a “revolving door” with the same people they regulated. It is almost a pretend situation that they are looking for insurance consumers. He has academic support for that position.

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993 article by the Washington Post, The insurance regulator’s revolving door raises doubtssaid:

Across the country, state governments often recruit insurance regulators from the industry itself, and these officials return just as often to the private sector, armed with professional contacts they made when in office.

…[A]s large parts of the insurance industry are facing financial crisis and shaken consumer confidence, there are new questions about whether regulators are sufficiently independent of the industry to maintain regulations.

At meetings of the National Association of Insurance Commissioners (NAIC), a private association closest to a national insurance regulator, many former commissioners and state regulators are permanent, either working directly for insurance companies or lobbying on behalf of insurance clients. . Of the 10 former presidents of the NAIC from 1981 to 1990, nine either came from or went to positions in the industry.

. . . .

But some federal lawmakers and industry watchdog groups argue that the revolving door creates an unhealthy atmosphere and relationship that makes it easier for insurance companies to design regulation to their advantage.

“It’s an extremely dangerous situation, first because it undermines the credibility of the process even if nothing is wrong,” said J. Robert Hunter of the National Insurance Consumer Organization. “But it can be much worse than that. It can undermine the {regulatory} process itself by giving the industry an insight into possible regulatory measures.

A 1990 study, partly sponsored by the industry, found rapid turnover among regulators and documented that for five years in the 1980s, about half of the commissioners who left the office went to work in the industry.

In 2016, the Center for Public Integrity published a study, Drinks, dinners, snacks and jobs: How the insurance industry judges state commissionerswith a key result:

Half of the 109 insurance commissioners who have left their posts in the last decade have moved on to the insurance industry – many leave before their terms expire. Only two moved into consumer issues.

The article further noted:

Proponents of consumerism and some commissioners say the close link between regulators and industry – bolstered by campaign subsidies, lavish dinners and the prospects for future employment – reduces consumer voices as insurance companies push for interest rate hikes, shape regulations and drop investigations.

“It’s sometimes very difficult to take a stand for consumers and have your voice heard,” said Sally McCarty, a former Indiana commissioner and retired consumer advocate. “Many commissioners do not care to do that for that reason – and they do not want to alienate the industry. … Many believe that the job is an audition for a better paid job.”

In his speech, Doug Quinn cited a recent study from 2021, The revolving door and insurance solvency ordinancewho found the following:

A major concern is that insurance regulation takes place at the state level, which can lead to potentially inconsistent, and thus ineffective, regulation between states. Within each state, insurance regulation is led by a commissioner, who has significant personal discretion. Anecdotal evidence suggests that one of the factors influencing their behavior may be the revolving door: Public regulators looking for jobs in the regulated industry. In particular, former Commissioner Sally McCarty claims that her colleagues rarely take a hard line on the insurance industry, as many commissioners see the job as an audition for a better paid job.

Is Florida’s insurance commissioner and his staff simply auditioning for a job in the insurance industry and acting as its “rubber stamp?” I do not know. I wish they would show up at consumer events and even listen to the concerns we as consumer advocates express. Unfortunately, they simply ignore us and rarely reach out. That is not the case in other states. Many friends like Mike Cappelli tell me that Commissioner Altmaier and his staff are simply bidding on the insurance industry.

In my opinion, Florida’s method of insurance regulation does not work well. Florida has an unelected insurance commissioner who oversees the Office of Insurance Regulation and a separate agency that oversees the insurers authorized to sell and adjust insurance claims through the Department of Financial Services. I entered in Did Florida erroneously insolvent an insurer, attempt to disqualify the law firm that pointed out the mistake and injure 91,000 policyholders through prompt and unnecessary non-renewals?:

Over the past month, I’ve been studying how Florida, unlike all other states, divides its insurance policies into two different bodies: the Office of Insurance Regulation and the Department of Financial Services. I’m not saying if this is wrong or right, but no one else is doing it this way. This shared strategy can lead to many errors if the communication between the two government agencies is not perfect.

Doug Quinn with the American Policyholders Association stands up for abused policyholders. Amy Bach and her excellent team at United Policyholders stand up for policyholders’ rights. Where is your insurance agent? You may need to attend a party sponsored by an insurance company at a meeting of the National Association of Insurance Commissioners to find out.

Today’s thoughts

Regulatory shortcomings mean that the cost of breaking the law is far lower than complying with it – companies are happy to pay fines rather than controlling pollution.
—Ma Jun


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