P/C Association Chief Csiszar Criticizes Spitzer Probe
December 01, 2004
Copyright 2004 A.M. Best Company, Inc.
BestWire
December 01, 2004
745 words
P/C ASSOCIATION CHIEF CSISZAR CRITICIZES SPITZER PROBE
WASHINGTON (BestWire) - The insurance industry is in need of "serious reforms" to ensure that it fulfills its risk-transfer role in the economy, but those reforms shouldn't include a federal regulator or optional federal charter, according to Ernst Csiszar.Csiszar, president and chief executive officer of the Property Casualty Insurers Association of America, has also been an insurance company executive and South Carolina's head insurance regulator, and he is the immediate past president of the National Association of Insurance Commissioners. As a highly influential and recognizable name in the industry, Csiszar was invited to testify before a Senate Governmental Affairs subcommittee on Nov. 16 regarding New York state Attorney General Eliot Spitzer's investigation of insurance industry practices.While he was in Washington, D.C., that week, Csiszar also addressed a meeting of the International Insurance Foundation, a financial-services group, during which he offered his take on regulatory reforms -- and sharply criticized Spitzer's investigatory approach. Spitzer set the industry on edge in October by suing Marsh & McLennan Cos. in connection with alleged bid-rigging and price-fixing. Spitzer also alleged the industry as a whole was rampant with corruption, an extrapolation that drew criticism from other regulators, including the District of Columbia's Larry Mirel (BestWire, Oct. 27, 2004).
"To besmirch an entire industry because of the work of a few bad apples" is a bad approach, Csiszar told the IFF group, according to a transcript of his remarks. "Filing lawsuits that significantly reduce the market value of individual corporations and entire industries -- damaging millions of consumers and tarnishing the reputation of the vast majority of ethical business professionals in the process -- is not my idea of consumer protection."As NAIC president, Csiszar had irked some of his fellow state regulators by pointing out shortcomings in the state regulatory system and criticizing the slow pace of state-driven regulatory reform. In his appearance before the IFF, Csiszar reiterated those criticisms."The fragmentation of insurance markets is neither efficient nor effective. When a company has to file over 350 versions of the same form in order to apply to sell one new product in 50 different jurisdictions -- and it then takes some states 18 months to approve that product -- clearly, we have a problem," he said. Fragmentation of the regulatory system, he added, is "extremely taxing on consumers and the economy," costing customers an estimated 8 to 15 cents for every premium dollar. "That's a 15% tax on every insurance policy sold in the United States," he said.Csiszar also said the industry should remain focused on fixing the state-based regulatory system and not get "sidetracked" by Spitzer's allegations. "The specter of the allegations of illegal activities is not going away for some time. We need to coalesce around this opportunity to push reforms in individual states and in Congress," he said.Csiszar also indicated his support for the State Modernization and Regulatory Transparency Act, called the SMART Act, put forth by House Financial Services Committee Chairman Michael Oxley, R-Ohio, and the chairman of that panel's Capital Markets Subcommittee, Rep. Richard Baker, R-La. That bill, which has been in draft form for months, would make sweeping changes to the state regulatory system but keep regulatory authority in state hands. Csiszar said legislators should consider additions to the SMART Act draft that would mandate transparency and disclosure of producer compensation arrangements. That, he said, "would instill another level of information that consumers can use to make sound business decisions."Changes to the regulatory system, Csiszar said, shouldn't include an optional federal charter, as some large insurers and insurance lobbies have advocated. Such a system would allow companies to choose to be governed under state or federal regulations."Proposals for an optional federal charter are not only politically unfeasible, they also run the risk of making insurance a government entitlement program," Csiszar. "An optional federal charter would create another bureaucracy in Washington that cannot serve the needs of its constituents."(By Chris Grier, Washington bureau manager, BestWeek: Chris.Grier@ambest.com)
December 1, 2004
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