NU Online News Service, Jan. 6, 3:03 p.m.EST

Emphasizing the need for a new approach to state government, NewYork's new governor is seeking a radical realignment of the way thestate does business, including folding the Department of Insurance in with two otheragencies.

Yesterday, newly elected Gov. Andrew M. Cuomo delivered hisState-of-the-State address where he proposed folding the Departmentof Insurance into two other regulatory agencies, the Department ofBanking and the Consumer Protection Agency.

In his speech, Gov. Cuomo, who was the state attorney generalbefore being elected governor, said he spent four years fightingcorruption on Wall Street and asked where the federal and stateregulatory agencies were to protect consumers.

"I believe Washington was primarily responsible, but I alsobelieve New York could have done a better job…I believe our currentorganization is not effective because it is not organized [to dealwith] the way Wall Street works anymore," Gov. Cuomo said in hisaddress.

He said the three separate agencies are failing to perform theirjob.

"We can have a win-win," the governor said. "We can consolidatethem into a department of financial regulation that better protectsthe consumer and the consolidation will save the taxpayers money byreducing the cost of three separate organizations."

Mr. Cuomo did not go into detail about how this new financialregulatory department would work or who would head it, since suchchange would first require legislative action.

Reacting from the insurance industry perspective, EllenMelchionni, president of the New York Insurance Association, toldNU Online News Service that she applauded the governor's intentionto reduce state spending and is hopeful that a reduction in thecost of the department would translate into a reduction for thecosts for insurers.

"We are very encouraged and hope the efficiency in new agencywill be created," said Ms. Melchionni.

Specifically, she spoke to the practice of suballocationinsurers have been subject to for years. The Department ofInsurance is funded through assessments on insurers that pay forthe department's functions. However, she said that through thelegislature, insurers have been paying additional assessments, "aback-door tax," to fund additional functions such as fire safetypamphlets for cigarettes and monies to the Department of Health forservices and expenses such as development of a forge-proofprescription program.

The NYIA filed suit early last year over the suballocations,which Ms. Melchionni said are "improper and deceitful." She notedthat of the $455 million in assessments for the 2009-2010 fiscalyear, $317 million went to suballocation and not to the running ofthe insurance department as was intended.

Ms. Melchionni said she hopes the changes will modernize thedepartment and emphasize market solutions to pricing issues whileallowing the department to concentrate on solvency and makingcertain companies do not charge too little for what theyunderwrite.

On the whole, she said the changes mean no downside forconsumers and that there are indications legislators are on boardwith the idea.

Ms. Melchionni said she remains optimistic about the governor'splans and his emphasis on creating a business-friendly environmentin the state, saying, "I think the opportunity is ripe forchange."