NU Online News Service, Feb. 16, 2:53 p.m. EST
Insurance industry trade associations are working with the New York governor's office to discuss differences of opinion regarding a plan to merge the state's insurance department with the Department of Banking and the Consumer Protection Agency.
The plan looks to form a new agency, the Department of Financial Regulation, to cut costs as well as improve the efficiency of insurance regulation—something the industry supports.
However, language in Gov. Andrew M. Cuomo's proposed budget empowers this new agency too much, possibly adding extra burdens on insurers, some in the industry said.
A story appearing in The New York Times noted, "Buried in the governor's new budget are provisions that would grant the executive branch sweeping new powers to investigate Wall Street banks, hedge funds and insurance companies, alarming some industry officials and raising the prospect of a major clash with his successor as attorney general, Eric T. Schneiderman, and local prosecutors over high-profile securities and investment cases.
Regarding the insurance industry's take, Ellen Melchionni, president of the New York Insurance Association (NYIA), told NU Online News Service, "If they want us to stay on board, they are going to have to make some changes, but we're encouraged by the conversations we've had with the governor's office."
Kristina Baldwin, assistant vice president for the Property Casualty Insurers Association of America (PCI), said there are a "number of concerns with the language in the budget," but she, too, remains positive about talks with Gov. Cuomo's people to address them.
Ms. Baldwin said the Department of Financial Regulation would have broad powers to go after and seek damages and restitution from any company engaged in "financial fraud," a term open to broad definition.
Gov. Cuomo is expected to submit an amended proposal in March. Ms. Melchionni said she is optimistic the amendments will deal with the industry's concerns.
New Tax for Cooperative Insurers
The NYIA has another complaint with the proposed budget. Provisions look to expand a 2 percent premium tax to cooperative insurance companies writing in excess of $25 million in annual direct premiums.
Cooperatives serve niches in the market that are either not served or underserved by large carriers like rural communities, immigrant communities, farms, contractors, mobile homeowners and Long Island homeowners. In exchange, cooperative insurers have received an exemption from the premium tax.
The tax would be "severely detrimental to underserved rural and inner city populations," Ms. Melchionni said. "This new tax could result in higher premiums for consumers and possibly lead to job losses."
The NYIA said about 10 cooperatives would qualify for the premium tax. These insurers cover more than 71,000 small businesses in the state and stepped up to write risks after Sept. 11, 2001 while other carriers reevaluated exposures.
Additionally, the NYIA is against a plan in the budget to use just 35 percent of assessments paid by domestic insurance companies for operation at the state's insurance department. The rest will go toward other agencies not related to insurance, the NYIA said.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.