A former high school principal, George Dale is now the longest serving state insurance commissioner in the nation. He has been elected by the people of Mississippi since 1975 and recently announced he would run for re-election to a ninth term. This interview with Insurance Journal, part of a series of interviews with 15 state regulators, was conducted in December, before a key Katrina claims court ruling and proposed settlements involving State Farm and before that insurer announced it would stop writing new home and commercial property risks in the state. The complete video interview with Dale can be viewed at www.insurancejournal.com/broadcasts.
Let’s start with Hurricane Katrina and the property damage and devastation that it did to your state. What is happening now and how has the industry’s response to the claim situation been in your state?
Dale: Well, after the storm hit, I said my responsibility is twofold: one, get as many clients paid as we could; and two, be sure there is a market when our coast begins to rebuild. We have three coastal counties out of 82 counties in our states, three that border on the Gulf of Mexico. We have got approximately $11.8 billion paid out by the insurance industry, the flood insurance combination statewide. People forget that the footage that you see on national TV is of the Mississippi Gulf Coast, but this storm, it did a lot of damage throughout our state. I live in Hines County. Hines is 200 miles from the Mississippi Gulf Coast. We had 27,000 claims filed in Hines County, $134 million paid out in the county in which I live, which is 200 miles from the Gulf Coast. It was just a bad storm.
How is the insurance market? Are the insurers pulling out from the coast?
Dale: Well, at this point the word is not “pulling out.” We have negotiated with insurance companies, we’ve begged, we’ve pleaded, we’ve coerced. We have done everything we can do. One of the advantages of being around forever like I have is you begin to develop relationships with people, with company executives and whatever, and I have worked real hard at sitting down with these people and said, “Don’t pull out and leave us bare.” Now I have to admit, one of the major problems that I have faced is how to handle the Mississippi Insurance Underwriting Association, better known as the wind pool, which is the residual market of last resort. So a lot of the companies that are still trying to make a decision of what they are going to do are waiting to see what we are going to do with the wind pool and we are working on that.
What are some wind pool solutions?
Dale: Well, we’ve got to find a way for insurance companies to recoup their money. We have companies that came to us and said, “We don’t write any business on the Mississippi Gulf Coast. We have had a good year in Mississippi. Our assessment is going to be greater than the total amount of business we have in the state. That won’t work.” So when they file with us for a zero rate increase, and you factor in their assessment to the wind pool, you jump up to a 27 percent rate increase. That just won’t work. Something is wrong with the system. We are looking at some things like giving benefits to insurance companies for them taking risks out of the pool, to encourage them to write on the coast. … [T]here are going to be a lot of things on the table that it is too early to discuss them, but our legislature goes into session in January.
Looking at the affordability and availability of property insurance for the coast right now, how would you rate it?
Dale: Well, the availability of it is not what we would like for it to be; the cost of it is much greater than we wish it was; but we will work and seek solutions that are not motivated strictly on politics, and make some long range decisions that could make it easier for companies to want to write in disaster-prone areas, particularly the Mississippi Gulf Coast. I think some of the mistakes that we as politicians make, is we make short term decisions that are politically motivated, that in the long run cause more heartburn than they should.
What are your thoughts on a national catastrophe plan?
Dale: Well, insurance is the law of large numbers; that is, spread the risk all over the country. Now if I live on the Mississippi Gulf Coast, or in Florida, or on the South Carolina coast, I’d think that’s a great idea, that the people in Montana and Idaho would pay a little bit more for homeowners so our people could live on the beautiful Bay of St. Louis, or looking out on the water in Biloxi. But if I lived in those states, I wouldn’t think it was too good of an idea. So the idea of it passing. … I was in a conference in Washington, D.C., recently, where a congressman from the Midlands said, “That issue might have come to where it’s got to be enacted, and it may be that there may be some government involvement into subsidizing some kind of major catastrophe insurance.” Because, according to the last census, almost 50 percent of the American people have moved within 50 miles of the water. We like the sand and the surf. It’s great. It’s better than snow. But can we afford to live there with the development that we have?
What motivates you to continue running?
Dale: Well, I’ve gone through this the last 15 months. It has been very stressful on me personally to cope with. Of course, this is not my first rodeo, but I have been through a lot. I have been through Frederick, George, other major hurricanes, but nothing the size of Katrina. This probably is the most difficult 13 or 14 months I’ve endured, but through it all I have never gotten tired of somebody telling me, “You know, your office helped me,” and I think that’s what we’re supposed to be all about, is trying to help somebody. There are a lot of people, though, that don’t look at you that way. They think if you don’t scream and holler and make noises that you cannot fulfill, and … they think you’re in bed with the insurance industry. I have been fortunate enough to pretty much say what I please, and voters have followed and forgiven me for it and re-elected me.
There have been recent settlements with insurers banning contingent compensation and mandating disclosure. How do feel about these?
Dale: I’ve never been against some form of disclosure in anything. We as public officials have an open book. Everybody knows how much money we make and the whole nine yards. I never have faulted that. What perturbs me a little bit is: I always wonder how much, when I buy a new car, is that salesman making on selling me that car; could he not cut the price of that car a little bit more; and some other facets. So, why pick out insurance for this type of elaborate disclosure? Sometimes I fear that some of our decisions, if you look far enough, there’s some kind of political orientation somewhere in the background that may enter into this. The oldest theory in the world is the harder you work the more you ought to get paid. If an agent gets out, works hard, and does the right thing, should he have some arrangement with the company that he’ll get money for his hard work? That’s the American system.
Do you think that Main Street agents have been caught in the middle of this whole debate? It was primarily the large mega-brokers caught in the scandals.
Dale: Let me be quick to say, if anybody finds any actual fraud, anything that’s deceitful, illegal or hidden, then that should be exposed and proper action taken. But I think the backbone of the delivery system of the insurance industry, I know in my state, has been the local agent. The local agent is involved with the local Little League team; he’s a deacon at the Baptist church, and that local citizen has a direct involvement with that agent. They don’t know an awful lot about the company. They don’t want to know about the company. But they want to know what they think about that agent. When you fail or find something that hurts that agent where you get less and less of those agents and put it in the hands of a few, I don’t think that’s good for the consumer.
How do you feel about state attorneys general getting in insurance issues?
Dale: Most attorneys general throughout the country look at themselves as budding governors or United States senators. And in many states, where the governor appoints the insurance commissioner and the attorney general, looks at the governor as their next opponent if they run for governor or United States Senate. They like to try to embarrass the insurance commissioner appointed by the governor so that it will help their standing in the next election. Now, that may not be true, but it makes a good story.
What are some of the priorities that your department has for your state in the coming year?
Dale: We’ve got to get a handle on this issue of insurance as it relates to disaster prone areas. … We also look every day at trying to modernize our office, with things like improving the speed by which we get insurance products to the marketplace, which has been one of the arguments that we have had held against us is that we’re too slow. That’s the reason the large companies want some federal regulator as the bank industry has so they can go about this in 50 states. Whereas if they deal with insurance commissioners, it’s a slow, tedious process going to 50 insurance commissioners. We’ve got to overcome that because that’s one of the weaknesses of our system.
In your 31 years in office, what has your relationship been with independent agents?
Dale: A lot of them are good friends. Two of them talked me into running for insurance commissioner in 1975. They both have denied that they did that, even though they remained good friends of mine over the years. I have a good relationship with the agents in our state both professionally and, in many cases, socially.