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Keep Consistent

Diplomacy can make the life of insurance regulators easier, but it should be accompanied by a modicum of consistency.
Question of the day – Should insurance commissioners give state lawmakers one distinct impression that they either do not agree with or think there’s a relatively good chance they will not agree with in the future?

I would say no, if only because people like me tend to lurk around and remind them of what they’ve said in the past. But it’s also a good idea to avoid it, since legislators tend to latch on to one mindset and keep it for all time.

Here’s the genesis for this discussion. Less than a month ago, Massachusetts Commissioner of Insurance Nonnie S. Burnes appeared before members of the Senate and expressed doubts about credit scoring and questioned the validity of a recent report that showed the relative predictiveness of the practice. She this week evidenced a 180 in thinking and seems to have adopted the industry’s way of thinking, which is that credit history reflects a person’s level of responsibility. It now appears that once 2009 rolls around, insurers that would hope to use credit to rate policies could find the Division ready to look favorably on that idea.

The temporary ban on credit was almost certainly necessary in the short time available for implementing a viable competitive insurance market. However, should the Division have gone further in its guidelines? Not to advocate restriction of a free market, but even insurers recommended caps on rate changes for the first year. The Division did not include any; should insurers therefore now limit themselves on their own for drivers that warrant premium increases? It may be naïve of regulators to believe that they can minimize disruption without more clearly stating their expectations.

Rather than examining premiums for four million drivers, as Burnes this week suggested regulators would do next year, Massachusetts should implement a feature similar to the New Hampshire Insurance Department – online examples of how insurers price policies for several different drivers and homeowners (see story, page 5). If you’re going to tell consumers to shop around, give them a good starting point.

Another case of possible misdirection occurred in Connecticut, when two lawmakers might have gotten the idea that the commercial insurance market should be more tightly regulated from Commissioner of Insurance Thomas Sullivan. To be fair, Sullivan did not necessarily throw what the legislators – Sens. Andrea Stillman and Andrew Maynard – ultimately caught and he does not actually appear to favor it. However, it won’t be surprising if the General Assembly comes back in session armed with a fervent desire to implement commercial lines underwriting restrictions.

In both instances, Burnes and Sullivan run the risk of supplying lawmakers reasons to believe they should take a particular policy stance – Bay State legislators on credit, Connecticut legislators on underwriting guidelines – when neither course is justified or in the best interest of the marketplace.

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