Tuesday, December 12, 2006

Lest you think I was picking on poor Rich Golick (R-Allstate)

From the Kansas City Star:

U.S. insurance companies boast assets of $5.6 trillion. They benefit from virtually no federal oversight. And the state officials who do regulate insurance companies often are drawn from the industry they police.

That's how insurance regulation works in America. But too often it may not be working for you.

The Kansas City Star found:

Regulators and insurance executives routinely trade jobs through a "revolving door."

More than half of the 35 insurance commissioners who left their jobs in the last three years got new jobs with the insurance industry, law firms, or lobbying groups that work for it, according to an informal nationwide survey by the newspaper. One-third of the new commissioners' replacements came from the insurance field.

Insurance companies invest millions of dollars attempting to influence regulators and lawmakers.

Insurers spent $119 million lobbying federal officials in 2005 a more than the auto industry and commercial banking combined. Only pharmaceutical companies spent more money on lobbying than insurance companies. Insurance also regularly ranks in the top 10 of industry campaign contributors, giving candidates more than $230 million since 1999.

Elected state insurance commissioners tend to be more consumer-friendly than appointed ones.

The newspaper's database analysis showed, for example, that insurance complaints filed in Washington state — where voters choose commissioners — are twice as likely to be decided in favor of consumers as those in Maryland, where politicians pick commissioners.

Examples of the cozy relationship between politicians and the insurance industry:

State Sen. James Seward of New York, chairman of the insurance committee, sponsored bills giving insurers tax credits, easier ways to reorganize their corporate structure, and a proposal that would weaken state oversight of auto insurance rates. Seward has received $500,000 in contributions from insurance interests.

Former California Commissioner Chuck Quackenbush allowed insurers to avoid investigations and fines for underpaying policyholders after a major earthquake. The insurers gave Quackenbush free TV commercials and made donations to charities that included his son's football camp.

Terri Vaughan, former Iowa insurance commissioner, approved a company's reorganization, which enabled it to become a public company. The company, Principal Financial, later gave Vaughan a seat on its board of directors. Her old boss, Iowa Gov. Tom Vilsack, took contributions from company insiders, including more than $40,000 from a former chairman.

The last bullet is, I think, the most important - when an insurance commissioner has to go to the voters to be re-elected, the insurance commissioner tends to be more friendly to the voters, and less friendly to the industry. That's not to say that the commissioner is necessarily unfriendly to the industry, of course; but some responsibility to the voters is better than none.