Maine’s Kofman Vows to Do the Job that Feds Can’t

Rookie Regulator Looks to Keep Pine Tree State on Even Keel

Although she’s held the post for less than a year, Maine Insurance Commissioner Mila Kofman is no stranger to insurance regulation. She has spent a lot of time in the academic, government and nonprofit sectors. She has been a health care researcher at Georgetown University and a regulator at the U.S. Department of Labor, specializing in state and federal health care reforms. She has also served as a consumer representative at the National Association of Insurance Commissioners (NAIC) since 2002.
In this exclusive interview, conducted by Insurance Journal’s Ken St. Onge, Kofman talks about the state of Maine’s insurance marketplace, and what she sees as her role in it.

Insurance Journal: What is the state of Maine’s property/casualty industry right now?
Kofman: The good news is that we have a very stable marketplace. We have lots of companies, lots of competition and many folks who want to do business in Maine. Our rates are some the lowest in the country, our companies are doing well financially and are profitable. So, it’s a big success story.

IJ: Back in the ’90s, the state of Maine enacted some workers’ compensation reforms. Has that paid off?
Kofman: It certainly has paid off. We have a very stable marketplace in the workers’ comp area as well. There’s lots of competition, companies are solvent and rates are affordable and accessible.

IJ: You mentioned solvency issues; I’m curious whether the problems with AIG have had an adverse impact on insurance in Maine?
Kofman: We’ve been very involved with AIG-related activities. One of the first things that I did was to set up a special team to work with the National Association of Insurance Commissioners and with the other states on AIG activities. It’s important to remember that AIG’s holding company is not an insurance company – it’s an investment company, and it was engaged in some risky investments, made bad decisions and now, of course, it’s paying the price. Now, some of its assets are insurance companies. The insurance subsidiaries are well regulated by the state insurance departments. I have no concerns about the subsidiaries. They’re all solvent, they’re all able to pay claims and for now, policyholders and others shouldn’t worry about their policies.

State regulators are working very closely with the federal government to make sure that policy holders are protected.

As assets of AIG’ holding company are looked at, we are making sure that consumers at the end of the day are protected.

IJ: One of the major topics on a lot of people’s minds is that of federal, rather than state regulationof insurance. How will AIG’s situation affect that discussion?
Kofman: One of the lessons from AIG is that state-based insurance regulation is working. It’s working well. We as state regulators are at the frontlines, protecting our consumers and making sure that companies are solvent and are able to meet their promises to consumers and pay claims. As the federal government continues to consider deregulating and federalizing insurance regulation, this shows that federal regulators are not always doing their job. They’re not always protecting consumers.

AIG’s holding company was subject to federal regulation and that did not work well. The federal regulators were asleep at the wheel. They could’ve been in there looking at the investments, figuring out whether they were too risky, but they did not and, hence, we have this problem.

But there is no problem with the subsidiaries of AIG. The insurance companies are well regulated and they’re solvent.

IJ: What are the lessons learned for state regulators from the AIG situation?
Kofman: My biggest lesson is that I have to do my job to make sure that the federal government does not take away authority of states to be able to protect consumers. We cannot have federal pre-emption disable the ability of states to protect consumers. I don’t think the federal government can do a good job protecting consumers.

IJ: Maine does have a significant number of properties along its coast, although the state doesn’t seem to face the same catastrophic issues that other areas of the East Coast do. What’s the status of coastal property insurance in Maine?
Kofman: Well, we have companies that are willing to and do offer coverage along the coast. So, we don’t have the availability problem that some states do. In some ways, we have an affordability problem for some homeowners who just can’t afford the price. As property values have gone up, so has the price of coverage; that is a concern. I am working with some of the insurance companies to figure out ways that they can offer more affordable products along the coast.

IJ: What about those who buy summer homes in Maine?
Kofman: Many people who buy second homes can more afford the premiums for homeowners insurance. My big concern is folks who inherit cabins or other homes from their parents or grandparents. As the property values go up, so does the price.

IJ: What are your goals for the department over the next few years? Are there any changes you would like to see?
Kofman: I was very lucky. I inherited a great team of highly skilled and professional people. But we can all do better. One of the things I’d like to do is become more efficient. I’d like to serve our stakeholders, our insurance companies, our agents and brokers and our consumers more efficiently and in better ways. So, that’s one of the things I’m looking at, improving what we do and how we can do better for all of our stakeholders.

IJ: Is there anything else you’d like to see happening with the insurance climate or the insurance department in Maine?
Kofman: A general observation: Our markets have been stable and my goal is to make sure that they continue to be stable. I want to ensure that there’s competition and that companies feel like they can come into the state of Maine and offer products and quality services. I also want to ensure they serve consumers, they pay claims and promises are kept.