A View From The Press Box

The biggest problem with state regulation is that, while advocates say it is the strongest consumer protection available, the fact is that in most states, the chief regulator's job is at the center of a musical chairs game played by insurance executives.

Newsflash everyone: Contrary to the "sky is falling" warnings from Ms. Praeger, there is simply no meaningful state consumer protection to "gut"--and the industry knows it.

To illustrate: When states release insurance company complaint ratios, hasn't anyone else noticed that they only release statistics for closed complaints that are "justified" (different terms used in different states--warranted, legitimate, etc.)?

Who determines whether or not that consumer complaint is justified, warranted, or legitimate? I'll give you a hint: The same entity that determines whether damage to your home is from wind (which they pay for) or water (which they don't pay for).

As a side note: about two years ago I became an unwitting third party claimant in a car accident. I thought that I would "test the system" against these beliefs I so confidently knew to be true.

I filed a complaint with my state insurance department (the insurer was misinterpreting state law to their advantage--no surprise), I was assigned a representative, issued a claim number, but then never even received a call back.

No e-mail, no attempt whatsoever to contact me--thus my complaint was never even included in the complaint statistics that year, as it was never closed, and apparently didn't even "justify" a response.

Hey, that's one way of lowering the ratio--simply ignore the complaints!

Wow! You call that strong consumer protection? How do we keep a straight face every time we claim that the states provide that? There is virtually NO significant consumer protection, and we all know it.

The effective reality is this (and I challenge anyone to show clear evidence to the contrary): In an insurance claim, the consumer must accept what is offered as settlement, like it or not, or take the insurance company to court. Period.

I don't know about the rest of the industry, but I would hate create any new laws that could possibly "gut" such armor-clad consumer protections as those.

It sure seems like sometimes the NAIC would have you believe that insurance consumers are unable to velcro their own shoes without a state regulator to assist them, and that the mean and nasty insurance company is out to steal the shoes!

Take this argument away and what does the NAIC and the states have to lean on? Their crystal-clear methods of rate suppression or control to protect consumers? (As in the current Florida homeowners insurance crisis.)

State complaint handlers acknowledging that with a given complaint, the company correctly followed the law, but "it sure would be nice" if the company would pay the claim or renew the policy? The establishment of uniform producer licensing laws as required by the 1996 federal GLB--Oh, wait, that one hasn't happened yet.

The next-to-last sentence in the article points out the real meat of this issue: " Far better, if uniformity is the biggest concern, for Congress to set national regulatory standards for state insurance departments to follow." If uniformity X 54 is possible, bring back the SMART Act. If it is not, bring on the OFC.

Sam, this topic always stirs up lively debate, which is good.

Why is that the banks have three different ways to be charted--state, national or federal--but the insurance industry can only have a state charter?

Does anyone know who the state bank commisioner/regulator is in their state?

I believe the current system for the insurance industry only benefits the NAIC, whose members are either elected or appointed, with whatever qualifications to be considered for the position being questionable. Some get appointed because they are good friends with the governor; and for the elected ones, I would love see the debates for that position.

I believe the only concern the NAIC has is the fear of losing power, which is always a concern of the ones who have it.

Any advocates of the current state-based system should try to get their company licensed and their product approved in 50 states and then reconsider their position.

The duplication, inconsistencies and downright contradictions of the current state system are almost intractable.

Hurray! It is about time that NCSL, NCOIL and the NAIC took a stand.

Commissioner Praeger also states, "It is just as important for us to proactively educate consumers..." For all of us who believe we are better served by state-based, rather than federal regulation, 'Insured Consumer' could provide no better example of that need.

But every industry participant advocating federal insurance regulation also needs to carefully read 'Insured Consumer.'

'Insured Consumer,' along with the U.S. senators and House representatives angry because they believe their constituents have been abused by the industry, are the allies you are seeking in your quest for the holy OFC.

There's no lightened regulatory burden on his agenda and he isn't looking for "optional."

This is in answer to 'Insured Consumer.'

You are obviously not a consumer in my state. We do not distinguish between justified and non-justified complaints. Any dissatisfaction with the insurance business is considered a complaint. Also, an acknowledgement letter is sent within a day or two of when a complaint is received.

That being said, it is true that there are complaints that cannot be resolved by state regulators, such as the value of a claim or who is liable. Those are disputes that need to be decided by a court.

However, if you are advocating federal regulation, you might want to talk to someone who has had to deal with a federal agency to try to resolve a problem.

Try contacting the U.S. Department of Labor if you have a problem with your ERISA plan. Good luck getting an answer there! While state regulation might not be the perfect system, it does beat the alternative.

States are also there to educate the consumers within their borders regarding problems that face those specific consumers. Midwesterners don't need to be educated about hurricanes, while Floridians don't need to understand the dangers of ice dams.

No federal agency is going to be able to effectively communicate with consumers in each and every state regarding their specific problems.

'Insured Consumer' may have had this experience in his/her state. I do not know in which state he/she resides. This is anecdotal at best as it is one example of a complaint that may or may not have been handled correctly.

Ms. Praeger is the insurance commissioner in Kansas. I worked in the state of Kansas as a claims person and marketing person for my company. When Ms. Praeger talks about consumer protection, she is speaking accurately.

I worked thousands of claims in my career in Kansas. The state insurance department protects both sides of the equation. I have seen them rule many times in favor of the insured versus the insurer.

Ms. Praeger's predecessor was Kathleen Sabelius, who is now governor and a very influencial member of her party. She got there by advocating for the consumer. She was not nearly as popular with insurance companies as she was with consumers.

'Insured Consumer' states that the effective reality is that an insured must take what the insurance company offers or go to court. Many customers have gone to the state insurance commissioner in Kansas and had satisfactory results without court or the associated legal expenses.

The state insurance commissioner even fined and forced an insurance carrier to return premium to consumers when they investigated (without public complaint) the carrier and found improper use of rates.

Both of the above are factual statements.

I do not believe that the federal government can better regulate our industry. Look how well they run the IRS, FEMA and Social Security.

Let's see, a new federal agency regulating the insurance business. That should go well. After all, the federal government is already doing an excellent, competent and efficient job in all it regulates.

For example: borders, trade agreements, public safety (food, medicine and transportation), capital markets and banking. Oh, and the infrastructure.

Depending on the upcoming elections, we also get to look forward to the federal government trying to force all citizens to buy into some health "insurance" scheme, which they get to "regulate" or else. I can hardly wait.

The NAIC and some states are hardly models of efficiency and fairness, but the industry needs to unify behind the states or a slow regulatory doom awaits.

States need to get some consistentcy in regulation or the cry for a single regulator will only get stronger.

The current system is difficult, expensive and complicated to the max. Try dealing with filings to the likes of Virginia, New Yor, Florida and others, and you'll be begging for federal regulation in short order.

On the one hand, those who support the status quo are saying the federal government PROBABLY will not be able to properly regulate the insurance industry. On the other hand, those who support OFC say state governments presently ARE not properly regulating the insurance industry.

In reality, it is very likely both positions are correct. If this is true, then why would it not be better to have one regulator presenting one set of rules, than 50 regulators presenting 50 different sets of rules?

If the concern is that only the current state regulators have the wherewithal to be insurance regulators, why not deputize them as federal government employees? This would continue to provide consumer protections AND continue the self-described regulatory expertise.

With state regulators continuing to insist "my rules are the best," and state legislatures unable to agree on NAIC model laws, there has not been agreed-upon uniformity.

States have had separate ways of handling every aspect of government since the country was founded, and the NAIC has been around since 1871. Why would anyone expect states to voluntarily agree on uniformity?

The history of our country and the state insurance regulatory scheme show that it will not occur.

Sounds like the SMART Act, which would force uniformity after three years, wasn't such a bad proposal after all. It would achieve uniform rules and avoid growing the federal government. Since the SMART Act is not part of the equation, it all comes down to choosing between one set of rules or 50.