Critics of elected insurance commissioners say the office can become too concerned with electoral politics instead of the regulatory process. To supporters, that’s a good thing.
Washington State Insurance Commissioner Mike Kreidler appreciates the political independence of being personally elected. It forces the insurance department to be more in tune with the needs and wants of insurance consumer, said the third-term Democrat. But Kreidler, a former congressman, said it’s not without a disadvantage, too: “When you walk into a legislative session, you don’t have anyone in the governor’s office looking out for you.”
Among members of the National Association of Insurance Commissioners, 11 states have elected insurance commissioners. In the U.S. Virgin Islands, the lieutenant governor serves as the top regulator. In all other states and jurisdictions, the post is appointed.
Georgia lawmakers are considering a constitutional amendment to make the now-elected post one appointed by the governor (BestWire, Feb. 8, 2010). In California, where commissioners have been elected since 1991, both candidates for the Republican nomination for governor — including the incumbent insurance commissioner — have said there is merit in exploring whether to do the same (BestWire, Jan. 29, 2010).
“Having independence from a governor, or having independence from whomever would make an appointment, is vital,” said North Carolina Insurance Commissioner Wayne Goodwin. The first-term Democrat said having an elected commissioner “is an extra level of consumer protection.”
Consumers “expect more from an elected commissioner,” Mississippi Insurance Commissioner Mike Chaney said.
In Goodwin’s 2008 race, both he and his opponent participated in a public financing regime that limited them to individual contributions of $200 or less. But in most states, running for office means raising a lot of money for campaigns. States vary in restrictions on commissioners raising money from the people and entities they regulate. In Louisiana, there are no specific limits on insurance industry contributions; the same laws apply to insurance commissioner candidates as apply to all elected offices, Insurance Commissioner Jim Donelon said, including a $5,000 maximum from corporations. Chaney, a Republican, said in his 2007 race, he raised all his money from agents.
In Washington State, insurance companies and insurer-run political action committees do not contribute to commissioner candidates, Kreidler said. Similar restrictions apply in Georgia, and are extended to the gubernatorial campaign of four-term Republican commissioner John Oxendine. Last year, Oxendine returned $120,000 in campaign contributions from 10 political action committees after an ethics complaint linked the origin of funds to insurance companies he regulates. State Rep. Austin Scott, an Oxendine rival for the GOP nomination, proposed legislation to bar insurance executives from donating to campaigns for insurance commissioner or to the campaigns of any incumbent commissioner (BestWire, Feb. 16, 2010). Oxendine called the bill “a political stunt by a desperate candidate.”
Some commissioners and industry watchers agreed that industry political influence can at least have the appearance of tilting the regulatory process, whether an office holder is appointed or elected — an effect that can be more pronounced when campaign donations are involved.
“I don’t want to be dependent on the industry,” Kreidler said. “When you’re a regulator, it would certainly be a perceived conflict of interest if you’re accepting money from the people you’re regulating.”
Donelon admits that he was against having an elected commissioner before he was for it. As a legislator, “I voted both ways on that bill,” the first-term Republican said. Insurance commissioner races can be contentious, but they force candidates to strike a balance in being both pro-consumer and pro-business, Donelon said. “We move to the center to demonstrate that we are pro-consumer Republicans,” he said.
Birny Birnbaum, executive director of the Center for Economic Justice, supports having elected commissioners — as long as regulated entities are barred from contributing. “The solution for this in the broader issue is to have public financing of campaigns,” he said.
John Lobert, senior vice president for state government relations for the Property Casualty Insurers Association of America, said, “I do not believe that the position is well-suited as an elected one. It just seems to me that direct politics should not play a part in the regulation of business and consumer affairs.” He added, however, “I don’t think there is a pat answer.”
A 2008 NAIC analysis of 10-year average property/casualty industry profitability showed roughly comparable results in operating profits and return on net worth in states with elected commissioners. The results show better results in those states when Hurricane Katrina’s effect on Louisiana and Mississippi are considered.
A key consideration is the level of discretionary authority the insurance commissioner has, said J.P. Wieske, director of state affairs for the Council for Affordable Health Insurance. Elected commissioners tend to have more discretionary authority, which allows them to make more subjective decisions on rates and forms, for example, he said, “which is where the problems can come in.”
In Texas, legislation to make the insurance commissioner an elected position failed in 2008 (BestWire, July 28, 2008). N. Alex Winslow, executive director of Texas Watch, noted that state voters elect overseers for agriculture and the oil industry. “Those are major industries, but they don’t touch the lives of every single Texan. The insurance commissioner does. He makes decisions every day about how much insurance companies charge, what they cover, and how they handle claims,” he said.
