Julie Benafield Bowman

Like insurance commissioners in other states, Arkansas Insurance Commis-sioner Julie Benafield Bowman, is keeping an eye on catastrophe issues and the availability of insurance related to them. Unlike commissioners in Arkansas’ neighboring states of Texas and Loui-siana, however, her concern is not hurricanes, but earthquakes.

According to the U.S. Geological Survey, Arkansas is considered a state with a high earthquake risk because of the activity level of the New Madrid Seismic Zone, the southern portion of which is located in northeastern Arkansas. As such, state and federal officials have urged the citizens of Arkansas to take steps to mitigate possible earthquake damage to their property.

Speaking with Insurance Journal‘s Andrew Simpson at the recent meeting of the National Association of Insurance Commissioners (NAIC), Commissioner Bowman discussed earthquakes and other insurance-related issues of importance to her state, including credit scoring, reinsurance, workers’ compensation and more.

Insurance Journal: Commissioner Bowman, what issues in particular at the NAIC are of interest to you?
Julie Benafield Bowman: Well, obviously now catastrophe issues are of interest particularly to Arkansas. We are interested in the earthquake in particular to catastrophes. We are right on the New Madrid fault line in Arkansas, so we are very involved in those issues.

Of course, we are involved in federal issues, as well, as they affect the consumers in Arkansas.

IJ: Regarding the issue of earthquake insurance, Allstate Insurance Com-pany, among others, has indicated a desire to pull back from writing those policies. Is that a particular concern in your state?
Bowman: It is a very big concern, we have had three companies actually ask to withdraw or tell us that they want to withdraw from writing earthquake insurance in Arkansas. We are concerned about where the consumers are going to get their earthquake coverage.

We do have an earthquake authority in Arkansas that writes earthquake insurance. But then there becomes the issue of capacity. Is there capacity for enough coverage for the consumers of Arkansas?

IJ: Beyond earthquake insurance, a number of states are struggling with property insurance issues as insurers face rising reinsurance costs and in some cases are pulling back from certain markets. Are Arkansas citizens feeling that?
Bowman: You know we are really not seeing that yet. We hear rumors about the rising cost of reinsurance or the inability to get reinsurance, but we are not seeing that in Arkansas.

IJ: So that’s a somewhat stable market as far as you’re concerned.
Bowman:It seems to be right now.

IJ: In the workers’ compensation field, it seems premiums have gone down recently. You recently did a study of that market, could you tell us what you found?

Bowman: That’s right, we do … a yearly study of that market. And the market in Arkansas for workers’ compensation has been steady over the last several years.

I have just recently approved a one half of one percent decrease in the workers’ compensation market. Now what that means is that the entire market cost for workers’ compensation will go down. In some areas, in some industries, there will be just a little bit of an increase, and in some areas there will be just a little bit of a decrease. So that overall, it’s a one half of one percent decrease.

What that tells us is that the workers’ comp market in Arkansas is very stable.

IJ: How does your state deal with the issue of credit scoring? Again, you have done a study–how is that playing out in your state?
Bowman: You know it’s interesting. In Arkansas, the credit scoring issue shows that probably two to three times the number of consumers are better off when credit scoring is used than when it is not used. They are rewarded for their good credit.

IJ: Does that mean that their premiums stay the same or are actually better?
Bowman: That’s exactly what it means.

IJ: And that’s been detailed and documented in your study?
Bowman: Yes it has.

IJ: Do you find, then, that credit scoring is on the rise? That more companies are using it?
Bowman: I think that they are, and it is very regulated in Arkansas. I mean, they must file with us exactly the credit score [methodology] that they’re going to use, and how they are going to use it, their algorithms, and they must follow that.

And if they do not, we will take a look at that; and sometimes they are fined if they do not follow those algorithms.

IJ: Is that an annual report on credit scoring? Or is that just something you did the one time?
Bowman: No, it’s an annual report. Absolutely.

IJ: In the area of medical malpractice, how are physicians in Arkansas dealing?
Bowman: Our malpractice rates are steady right now. They are stable, I don’t believe we are going to see a rise this year in those. We had some reforms a couple of years ago, before I became Commissioner, in that area. And right now they are steady and stable.

IJ: The independent agent and broker community works closely with insurance commissioners in a number of states. And I wonder what communication you have with them and what issues have you been able to work on with them?
Bowman: You know it’s interesting, in Arkansas we have a great relationship with our agents, our brokers, our producers. They are very involved with the department and the department is very involved with them; they are always willing to help us on issues and we are always trying to help make their lives better also.

As far as the broker compensation issue that was nationwide, we did pass some legislation during the last session to make it a little bit more transparent for those who are brokers–those producers who represent both sides of the equation. The transparency issue worked out well for both sides.

IJ: Have there been many complaints to your department on the issue of compensation for brokers?
Bowman: No. Not many at all.

Topics Catastrophe Agencies Workers' Compensation Reinsurance Arkansas