Consolidation Concerns

The big state agency that oversees insurance producers in New York will soon become a whole lot bigger – and that’s left a lot of agents in the Empire State wondering just how it will affect them.

Later this year, The New York State Insurance Department will complete its merger with the Banking Department to become the New York State Department of Financial Services (DFS) – a new, bigger regulatory agency that, in the opinion of Gov. Andrew Cuomo, is better structured to oversee the complicated business of insurance and banking.

Perhaps he’s right, but most agents and small businesses would probably argue that bigger doesn’t mean better. Quite often, to many folks, “bigger” tends to end up meaning something more like “slower, less flexible, unresponsive to change, frustrating and difficult to navigate.” The new agency – which will be led by Cuomo confidant Benjamin Lawsky (see page 8) – has yet to launch, but there is a growing fear among agents that the new DFS could take on those less flattering qualities.

“We really think it could go either way,” said Dick Poppa, president and CEO of the Independent Insurance Agents and Brokers of New York, which is currently suing the department for what basically amounts to regulatory mission drift. “We do see the opportunity – if this is managed correctly – to make it a much better department in terms of its responsiveness to rate and form filings, its responsiveness to a number of administrative things like approving CE courses and that kind of thing… (but) if they just see this as kind of mashing together banking and insurance, doing the same old thing… it could end up being a nightmare because the department has to learn to be more responsive.”

Chris Brassard, newly elected chairman of IIABNY and an agent in the state, echoed those comments. “Our fear is that the department may not have the efficiency it needs to respond to agents and consumer needs in a timely manner,” he said. “How they will consolidate and come up with any efficiency, I’m not sure. Efficiency could just mean a reduction in headcount and if that happens we could see a slowdown in the insurance department. I think the jury is out.”

It goes without saying that the last several years have produced an increasingly testy relationship between the regulated and the regulators in New York. IIABNY and the Council of Insurance Brokers of Greater New York, another trade group, unsuccessfully sued the department over transparency regulations last year and are in the process of appealing that suit. (see page 14). The New York Insurance Association, a trade group of insurers, was also recently involved in a lawsuit against the state over what it says is the improper use of assessments paid by insurers.

Although it’s unfair to label it before DFS has even started, its clear that the agency faces an uphill battle when it comes to winning over the hearts and minds of the New York insurance world.

As to whether it can, the jury will have to remain out for now.

Topics New York Agencies Legislation