Montana Fundraising Letter Spurs Ethics Debate

Additionally, Mr. Morrison noted that an NAIC complaint database system was scheduled to become operational on Dec. 1. The database shows the number of complaints against each insurer, classified by type, and information about the insurer. In a later phase of the initiative, he wrote that an attempt will be made to make individual complaints available.

In an interview with National Underwriter, Mr. Morrison said his letter does not present a conflict of interest because "I do not regulate trial lawyers." To date, he said that the amount of money raised by the letter to the several hundred national members of the insurance segment of the ATLA has been under $2,000. He said his campaign debt stands at about $35,000.

The reason he approached lawyers nationally, he explained, is that there is a $400 limit per person in Montana and given that small amount, it was necessary to raise money outside the state.

When asked if he would return the contributions, he said "absolutely not." He noted fundraisers thrown by the insurance industry for commissioners both at and outside NAIC quarterly meetings.

Mr. Morrison said that it is "important for insurance commissioners to make sure that they are not overly influenced by the industry." However, he also noted that commissioners also need to listen to the industry.

He said the overwhelming majority of attendees at NAIC quarterly meetings are industry people compared with a handful of consumer advocates.

During his tenure as insurance commissioner, which started with his election in November 2000, Mr. Morrison said that he has "not seen anything at the NAIC in which any commissioner was unduly concerned by a particular interest. I have not seen anything to suggest that anyone is beholding to anyone else."

He added that he has abided by Montana law and has not taken contributions from any corporation. He has also not taken any contribution from a political PAC, he added. However, he said that he might have received contributions from certain agents.

He said he will continue to pursue consumer initiatives as well as work for the industry. He noted his efforts to receive federal assistance for insurers in the wake of the events of Sept. 11.

Kevin Hennosy, chairman of SpreadtheRisk.org in Kansas City, Mo. and a consumer advocate, said the issue underscores the need to publicly finance campaigns. He acknowledged that Mr. Morrison has no regulatory authority over trial lawyers.

Mr. Hennosy concurred that fund raising has gone on at quarterly meetings and said that the NAIC should adopt a policy statement at its executive and plenary sessions that "bans raising campaign funds at NAIC meetings."

"Commissioners know this kind of thing goes on, it is not good, and know what to do to stop it. They have decided to turn a blind eye to it," he said.

Incoming NAIC President Terri Vaughan said that since she became a commissioner in 1994, it is a criticism that has been aired. It is important to note, she said, that commissioners are chosen by their states' own constitutional processes, and if commissioners are perceived as being too tied to the industry, then it is up to individual state governments to address any concerns.

Ms. Vaughan, who is Iowa's insurance commissioner, added that when the matter was discussed in 1995, it was decided that it was not appropriate for the NAIC to prevent fundraising because it is a state issue. She said if the issue is raised, she would welcome the opportunity to revisit it.

Insurers, as this story went to press, were planning to express their own concerns in a letter to Ms. Vaughan about disclosing individual consumer complaints to the public. The letter noted that although insurers back disclosure of "complaint ratio" information, they do not believe customers' personal information in complaints should be disclosed.

Insurers proceeded in good faith in working on a database that would provide a level of information to consumers, according to Paul Blume, vice president with the American Insurance Association in Washington. But the letter suggests that the database could become a "roadmap to trial lawyers," he said, adding that he is concerned that "litigation could become the regulator of insurance." He said that revealing private consumer information in complaints would cause difficulty for insurers.

On the issue of fundraising, Mr. Blume agreed that "insurers and insurance groups do raise money for elected commissioner candidates they support. Attorneys raise money for candidates they support. However, I do not recall a time when an insurer or insurance group has used an NAIC policy and/or position as a means to raising money for a commissioner candidate. That is what is troubling about the Morrison-to-ATLA letter."

Roger Schmelzer, vice president-regulatory affairs with the National Association of Mutual Insurance Companies in Indianapolis, said, "the issue is what is going to be done with the database. Is it going to undermine state regulation or help consumers?" Mr. Morrison's letter underscores concerns that the database be properly used and that individual complaints not be used as a source for trial lawyers to create a plaintiffs' class, he noted.

Among the points that insurers hope to address with regulators, according to Mr. Schmelzer, include a company's right to respond to a complaint and make sure that there is standardization in the information reported.

Jack Dolan, a representative for the American Council of Life Insurers in Washington, said "ACLI frequently finds itself at odds with the trial bar. Still, it remains to be seen what impact it will have on Mr. Morrison, in his role as the insurance industry's regulator."

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

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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