Elections Change Face Of State Regulation

By Jim Connolly

NU Online News Service, Nov. 7, 2:06 p.m.,EST?The face of state insurance regulation might look verydifferent following this week's elections, with more "publicinterest oriented" or "liberal" regulators likely to be added tothe fold next year, industry observers said.

They predicted that, while work on such issues as modernizinginsurance regulation and ensuring consumer privacy is likely tocontinue, the way these items are perceived and handled couldchange dramatically.

Indeed, the new group of insurance commissioners could offer avoting block that will be more supportive of consumer protections,according to one consumer advocate, Kevin Hennosy, chairman ofSpreadtheRisk.org in Kansas City, Mo.

At least 23 new governors were elected, which could lead tochanges in the insurance commissioners in those states where thepost is appointed.

Perhaps the most closely watched race for governor amonginsurers was in Kansas, where Democrat Kathleen Sebelius, insurancecommissioner and former president of the National Association ofInsurance Commissioners, handily won against her Republicanopponent, Republican State Treasurer Tim Shallenburger, by a53-to-45 percent margin.

In addition, four elected insurance commissioner posts were inplay, producing one new face, two familiar faces, and one thatresurfaced after seven years away from insurance regulation.

The new face--Sandy Praeger, a Kansas Republican--will fill thespot being vacated by Ms. Sebelius. In Georgia, John Oxendine, aRepublican, was reelected for a third term, while Carroll Fisher, aDemocrat from Oklahoma was reelected for a second term.

In California, John Garamendi, a Democrat who frequently clashedwith insurers during a prior term as commissioner, beat hisRepublican opponent, Gary Mendoza. California is closely monitoredby insurers because its legislature is addressing criticalinsurance issues that include long term care oversight, privacyprotections, and workers' compensation reform.

Mr. Garamendi has expressed an interest in working with insurersand starting anew, according to representatives from the AmericanInsurance Association in Washington, and the National Associationof Independent Insurers, based in Des Plaines, Ill.

In his last term in office, his implementation of Proposition103--a ballot initiative that ordered insurers to give auto premiumrebates to policyholders--created severe tensions between Mr.Garamendi and insurers.

California's legislature is going to continue to presentchallenges to many business interests in California, according toindustry trade groups.

Moderate Democrats will not be as strong a presence goingforward in the state, and a more liberal legislature could act veryquickly to pass privacy restrictions harmful to insurers, accordingto Bruce Ferguson, vice president of state relations with theWashington-based American Council of Life Insurers.

Mr. Ferguson suggested the California legislature could try toput privacy legislation in place earlier than any action byCongress, thus setting the benchmark for a national standard.

In Illinois there could be "pent up demand for additionalinsurance regulation," according to John Lobert, senior vicepresident of state government affairs with the Alliance of AmericanInsurers in Downers Grove, Ill.

In Illinois the Democratic sweep over a longstandingRepublican-controlled legislature--as well as a new Democraticgovernor, Rod Blagojevich, and attorney general--will create adifferent political climate, and could result in the appointment ofa new insurance director to replace Nat Shapo, a Republican,according to industry observers.

Such an appointment, according to industry representatives,would create a hole in NAIC leadership since Mr. Shapo is slated toassume the number-two post of vice president. However, thereelection of Arkansas Governor Mike Huckabee will ensure that MikePickens, Arkansas insurance commissioner, becomes NAIC presidentduring the winter meeting in San Diego next month.

The deregulation of the insurance market in Illinois might endas a result in the shift in power, said Mr. Hennosy ofSpreadtheRisk.org. Indeed, the momentum might shift towards moreregulation, including over ratemaking, said Roger Schmelzer, vicepresident of regulatory affairs with the National Association ofMutual Insurance Companies in Indianapolis.

In addition to Illinois, 14 other states elected new attorneysgeneral--a position that insurers are careful to monitor given ahistory of suits that have been brought by individual states overinsurer sales practices.

In Florida, a newly created post of chief financial officer wonby Tom Gallagher, the current insurance commissioner, will leavethe top insurance regulatory spot vacant. Mr. Gallagher andreelected Governor Jeb Bush will make an appointment to thepost.

In Texas, State Rep. David Counts, D-Knox City, former presidentof the National Conference of Insurance Legislators and chair ofthe insurance task force of the National Conference of StateLegislatures, was not reelected.

Rep. Counts has been an NCOIL member since 1988, and the loss ofhis experience on insurance matters will be keenly felt, accordingto Robert Mackin, executive director of NCOIL, based in Albany,N.Y.

Although Republican Governor Rick Perry was elected in Texas tokeep the post he assumed when George W. Bush won the presidency twoyears ago, another key state official--Speaker of the House PeteLaney, a Democrat--was not reelected.

Mr. Laney's defeat could mean that regulation of county mutualassociations could be reexamined, according to Robert Zeman, seniorvice president and assistant general counsel with the NAII.Currently, he explained, county mutuals are regulated for forms,but not for rates.

Jim Connolly is a senior editor with NU's Life &Health/Financial Services edition.