I’ve just returned from the National Association of Insurance Commissioners’ summer meetings in Atlanta, where the big news was the announcement of NAIC CEO Terri Vaughan’s pending departure from the regulators group.
Vaughan’s stated reasons for stepping down early next year are family issues and a desire to complete a revised version of the textbook Fundamentals of Risk and Insurance, which she originally published in 2004 with her late father, Emmett Vaughan. I have no reason to doubt that those are her sincere motivations and there certainly wasn’t been any scuttlebutt at the meeting that the move is anything other than voluntary.
Over her four-year tenure at the helm of the group, Vaughan distinguished herself as the public voice of state regulators who were pushing back against two simultaneous assaults on their authority from the federal government: the Patient Protection and Affordable Care Act and the Dodd-Frank Act.
On the Dodd-Frank front, the regulators’ success was nearly absolute, as the bill exempted the state-regulated business of insurance from virtually all of its provisions. There are plenty of aspects of the bill, like derivatives regulation, that could impact insurers in some way, and there are probably even a couple of the biggest life insurers who will have to monitored by the Financial Stability Oversight Council. There were also relatively uncontroversial reinsurance and surplus lines reforms, and the creation of non-regulatory Federal Insurance Office. But given that the legislation was responding to a financial crisis that had at its heart the collapse and bailout of insurance giant American International Group, it would be hard to imagine a major piece of financial reform that gave more deference to state insurance regulators than the final Dodd-Frank product.
Now, granted, PPACA does go significantly farther than Dodd-Frank in preempting state regulation and establishing a truly federal system of oversight for health insurance. But bear in mind that the NAIC is mentioned by name 21 times in the health care reform bill. The law gave the group enormous latitude to essentially write several key portions of its rules, including how minimum loss ratios would be calculated. That’s pretty remarkable when you consider that the NAIC is, despite some confusion on the point, still a private organization.
National Underwriter stoked rumors with a report that former Pennsylvania Insurance Commissioner Diane Koken already had the inside track on the job, but the group’s president, Florida Insurance Commissioner Kevin McCarty, pooh-poohed that claim in a press conference, saying the group would undertake a thorough search. If I were a betting man, I’d put my money on Vaughan’s protégé, outgoing Iowa Insurance Commissioner Susan Voss, who is stepping down from her regulator post at the end of the year. But truthfully, anyone’s guess is as good as mine.
What I’m more curious about than who will replace Vaughan is what will become of the Center for Insurance Policy & Research, the NAIC appendage she was instrumental in creating shortly after being named to the post in 2009. It’s never been fully clear why the NAIC needed – or even whether it was appropriate for the group to maintain — its own public policy think tank, complete with its own journal (which is edited, I should mention, by R Street’s own Lars Powell ).
When the center was created, the cynical looked to Vaughan’s history as an academic herself and imagined it would serve as a way to offer grants or publishing venues to her friends in the ivory tower. That’s always struck me as a silly charge, and it really hasn’t played out that way at all. There has long been a robust academic dialogue inquiring into the nature of insurance markets, and there is no shortage of publishing outlets, or well-heeled foundations and sponsors, for insurance scholars to draw upon. Adding one more doesn’t really make that much of a difference.
In truth, I think the CIPR’s real purpose has been to proactively put forth the kinds of reports one expects the Federal Insurance Office ultimately will be in the business of producing, but with a decidedly more pro-state regulation bent than FIO could be trusted to maintain. Indeed, if you want to get really conspiratorial, one could say a pleasant side effect of creating the center – from the NAIC’s perspective – is that getting involved with so many of the leading lights of the academy might just make it ever-so-slightly less likely that they’ll take on projects that promote, say, optional federal charter. Which is not to say this was by design, necessarily, but it certainly is convenient that it works out that way.
Under Vaughan, the CIPR has been given almost co-equal billing at many of the group’s events, and I’m told a good number of what would ostensibly appear to be NAIC staff actually draw their paychecks from CIPR. It’ll be interesting to see if whoever takes her place will continue to maintain the center as something that is core to the NAIC’s mission, or whether it will just slowly fade in relevance.
Of course, if the NAIC really wanted to foster more serious research of insurance markets, it would seem the best thing it could do to would be to make its enormous troves of proprietary data available to both scholars and the general public free-of-charge. But something tells me that, whomever Vaughan’s successor ultimately turns out to be, that probably won’t be one of his or her highest priorities.