New York Insurance Superintendent Eric R. Dinallo–placed in charge of a panel to modernize financial services regulation across the board–outlined an approach focusing on pragmatism, effectiveness and efficiency during an exclusive interview earlier this week with editors from National Underwriter.
The complete interview, featured as the cover story of NU's June 18 edition, can be accessed at www.propertyandcasualtyinsurancenews.com.
The 43-year-old superintendent–named to his post in January, and confirmed by the legislature in mid-April–is perhaps best known for his work probing the mutual fund and investment banking industries as financial crimes prosecutor under Gov. Eliot Spitzer, when his boss was New York's attorney general.
His new position as insurance superintendent took on more prominence recently when he was also named as chair of the New York State Commission to Modernize the Regulation of Financial Services.
While the panel's study is not due until next June, Mr. Dinallo emphasized that Gov. Spitzer is not the type of leader who is going to just wait around for a thick document that "gets plunked on the table." Instead, he said he expects to be recommending changes as the study proceeds.
In reviewing regulations, he explained that his philosophy comes down to a simple query: "What was the wrong or evil that this rule was intended to prevent? That is a core question."
If particular rules, procedures or regulations turn out to be antiquated or simply ineffective, they need to be changed or abolished in pursuit of modernization, he added.
"What we do very well on the insurance side is protect consumers. We have robust exams and enforcement," he said. "But I don't think we have been great on bringing product to market, policy rate and review. We could synthesize that and streamline it a lot to help the industry move faster."
He cited the possibility of adopting new regulations rather than legislation as a means to achieve short-term modernization goals. He also conceded there may be some markets where federal oversight might make sense–such as global reinsurance or large commercial risks–although he opposes any attempt to pass "optional" federal oversight.
He said such a voluntary system would lead to "regulatory arbitrage," in which insurers could play state and federal regulators against one another.
Concerning broker compensation, while the investigation of the insurance brokerage industry may be over, he said he still has questions about whether brokers are free of conflicts of interest.
He said he also wants to study the impact of settlements between brokers and state attorneys general that in effect created two markets–intermediaries who take contingents and those who don't.
In addition, he provided a peek into the hands-on roles that he and Gov. Eliot Spitzer played in behind-the-scenes negotiations resulting in the settlement between seven insurers and Silverstein Properties of over $2 billion in lingering World Trade Center claims. (See the complete magazine story for details.)
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