Jim Atterholt, Indiana, Commissioner of Insurance

Indiana Insurance Director Jim Atterholt is focused on bringing more insurance companies to his state. Atterholt said the current Indiana governor has a strong pro-business philosophy and has made “growing insurance jobs” one of his top priorities.

Speaking with Insurance Journal’s Andrew Simpson at recent National Association of Insurance Commissioner’s national meeting, Atterholt provides his insight on growing insurance business in Indiana, commercial deregulation, broker compensation and all the important insurance issues Indiana is facing this year.

Insurance Journal: Indiana’s business climate for insurance companies has a good reputation within the insurance industry. If I were an insurance company CEO, what might you say to convince me to expand or locate within your state?

Jim Atterholt: Well first of all, we have a new governor, elected last year. He was former head of the Office of Management and Budget for President Bush, and he has a very strong pro-business philosophy and insurance is part of that. He’s made the insurance commissioner a part of his cabinet and growing insurance jobs is one of his number one priorities. We have traditionally had a very positive regulatory and legislative environment in Indiana and we hope to build upon that.

IJ: Several states have reduced their premium taxes recently or announced plans to do so. Indiana already has a low premium tax. Is there any discussion about reducing the premium tax again?

Atterholt: Absolutely. When I was in the legislature a few years ago we had a five-year phase down from 1.8 to 1.3, and now we’re taking a strong look for the next legislative session to try to lower that even further. We want to be a leader on that front.

IJ: You have stated on several occasions that you think a stable and predictable regulatory climate is important. Would you explain what you mean by that, and what steps Indiana is taking to achieve that goal?

Atterholt: First, I think the insurance companies don’t want any regulator to “lay down” for the companies. I do think they, in fact, want us to go after the bad actors. The key is we have to differentiate those companies that are consistently good actors and treat them accordingly and give the them the benefit of the doubt, work together with them, have establish very positive relationships. Then, we need to come down hard on the bad actors that are actually in the minority because the truth is that they are at a competitive advantage over the good actors—if they’re not following the rules.

Second of all, I think the industry clearly wants to have a predictable, consistent environment. It is important that they (companies) know what to expect and that there
is not a lot of desk drawer rules or hidden biases.

And, sometimes insurance companies are good fodder for politics, too. In Indiana we have made a conscience effort not to embarrass companies and to work with them
privately to resolve differences—that approach helps both the companies and consumers.

IJ: This has been a relatively quiet legislative session, however, there was one notable Indiana bill that passed—commercial deregulation. Why this bill so important?

Atterholt: Commercial rate deregulation is important. For now, on the “rate” side, Indiana is deregulated and that is a good thing. Companies have to file for “informational purposes” only.

Building on that victory, there is current discussion of looking at the possibility of deregulation of forms. The whole issue of commercial deregulation is part of a broader “speed to market” push that we’re implementing at the Indiana Department of Insurance.

IJ: Another important issue other states have had to delve into is the issue of broker compensation and disclosure. What has been Indiana’s experience with this issue?

Atterholt: We took a “wait and see” approach broker compensation and disclosure issues, as opposed to over-reacting early on. We wanted to see all the facts and we’re still sorting through the issue, but it has not been a significant issue in Indiana. We’re watching it very closely, but at the same time it’s not been a huge issue for us in our state.

IJ: The medical malpractice market can be rather volatile and difficult? Has that been the case in Indiana?

Atterholt: We actually have a very healthy environment for companies to write medical malpractice. In 1974, former Governor Bowen had supported a revolutionary medical malpractice reform system that put certain caps on damages that have allowed the insurance industry to thrive and compete. One of the largest companies, Medical Protective, is home-based in Indiana as well. However, Medical Protective does have a number of competitors and for that reason I would say the market continues to be a healthy one.

IJ: What other specific problems does the insurance industry face in Indiana?

Atterholt: What the current administration has inherited was the “speed to market issue.” We had quite a backlog on rate and form filings in both personal and commercial lines and in the health area as well. We have since beefed up all of those departments. We’ve made speed to market a priority issue because, quite frankly, if we can’t get products to market quickly companies aren’t going to want to do business in Indiana, (particularly our domestic companies), and secondly, new insurance products are ones that consumers want and demand to have. Right now the department has between one to two weeks to turn around rate and form filings. We have eliminated the entire backlog. Speed to market is going to remain a priority for Indiana from here on out.

IJ: What issues are priority ones for you at the NAIC?

Atterholt: One of the first things I did as commissioner, particularly as a former legislator, was to urge the Indiana General Assembly to pass the Interstate Compact. To me, with all the calls for federal regulation, one of the very legitimate arguments was that many companies, particularly national companies, had to file in every single state to get their products to market. At the same time, these companies are forced to compete with banks and security firms that must comply with federal regulation.

Now, with the Interstate Compact, there will be one stop shopping for those states that are members. The Interstate Compact should address a lot of the industry’s concerns. Indiana wants to be a leader on that front.

IJ: The Interstate Compact affects largely life and annuity products, is that correct?

Atterholt: Yes, it affects life, annuity, long-term care and disability.

IJ: Is there any prospect of the Interstate Compact being carried over to the property/casualty side of the industry?

Atterholt: I hope the current Interstate Compact sets a model for the property/casualty industry. It may be a little bit down the road, but again, if the Compact works at this level on the life side, I would love to see it replicated at some point for property/casualty.

IJ: Do you think we’re going to see federal regulation becoming a reality anytime soon?

Atterholt: I do not—certainly not this year, and particularly with the Interstate Compact coming into play.

If we, as states, get our act together particularly on the speed to market issue, and secondly, on market conduct exams where there’s a lot of duplication, we can protect state regulation of insurance. For example, insurance companies are often terrorized by having to submit to multiple different exams for multiple different insurance commissioners. We need to do a better job of coordinating market conduct exams.

Here in Indiana we just don’t hand out market conduct exams like they’re candy, we’re very discerning. If we can bring a company in and work with them privately and resolve differences, there is always a positive result.

The lawyers are sometimes disappointed, but it’s certainly much better for the companies and for the consumers.

IJ: Is that all part of having a stable and predictable regulatory climate?

Atterholt: Yes, and just part of a regulator trying to be reasonable and fair. The goal is too impact consumers in a positive way, but also be fair to the companies and, again, keep the lawyers unemployed, if we can.