David Rivera, Colorado, State Insurance Commissioner

In 2004 at the age of 34, David Rivera was appointed to be Colorado’s State Insurance Commissioner, the youngest insurance person to serve in that position. This January, newly elected Gov. Bill Ritter announced he would be replacing Rivera, appointing Republican Marcy Morrison to the position.

Despite his young age, and shortage of time in the office of Insurance Commissioner, Rivera helped the state transition from a no-fault auto insurance system to a tort system. Additionally, he helped Colorado to weather the storm when a large insurance provider in the state terminated its contract and other large insurance companies merged.

With just a few weeks remaining in office, Rivera looked back at his experiences and had a few words of advice for the incoming regulator. He shared these thoughts with Insurance Journal’s Editor-in-Chief Andrea Ortega-Wells at a recent meeting of the National Association of Insurance Commissioners.

Your state recently switched from a no-fault auto system to a tort system. How is that going and has it resulted in lower rates for Coloradoans?

Rivera: Colorado switched on July 1, 2003, from a no-fault auto insurance system to a tort system. The main reason for this switch was because we had unsustainable premium increases in Colorado for auto insurance. We had the eighth highest auto insurance rates in the nation. We were seeing double-digit increases from year to year. Really, we could have actuarially had 50 percent increases in our state.

The switch has been positive for consumers in Colorado for a couple of different reasons, first from a cost perspective. The National Association of Insurance Commissioners just came out with its survey showing that Colorado had the highest decrease in auto insurance rates from 2003, the year we switched, to 2004, by a factor of five of any other state. So the switch created a lower cost for consumers and more choice.

Under the old system, consumers had to purchase $130,000 in mandatory coverage. Under the new system, they can choose the type of coverage that serves them. And the switch created much more competition. We have 25 additional insurance companies that have been licensed to offer auto insurance in Colorado. We have 204 companies total. In terms of choice, cost and competition, I think it has been positive.

The one unintended consequence has been how quickly the providers get paid under the new system and how much they get paid. We’re still trying to figure out, under the new system, how to address those two issues.

Do you think consumers are making the right choice under the new system?

Rivera: I do. I have a lot of faith in consumers. From a general point of view it’s always preferable, to me, to have a consumer make a decision about what’s best for him or her, as opposed to government making that decision. That’s what was happening under the no-fault system. Of course, any time you give consumers more responsibility for the decision-making, there are going to be mistakes. But, again, I put confidence in consumers to make the right decisions rather than government.

Another thing that recently passed in your state was a new ethics in government bill. Can you talk about why your state felt the need to develop legislation like this?

Rivera: In the national climate, there have been some ethics issues, particularly with Congress. I don’t think any state is immune from ethics issues. I think Colorado, relatively, hasn’t had that many problems. What Colorado does have is a pretty easy system in terms of amending the state constitution. It might have been a factor that it was really presented as ethics in government. A lot of the voters who approved this measure may not have understood some of the unintended consequences of the initiative. It was something that certainly sounded good. It passed. But, as we’re seeing since it was approved by the voters, a lot of unintended consequences are starting to come out of it.

At some point it may need to be revisited. We all obviously want the most ethical government we can have, but sometimes when we approve something we’re not really thinking about all the potential consequences of that decision.

Ethics also has been a big issue lately in the insurance industry, particularly in regard to agency compensation and disclosure. I’m sure you’re aware of the multi-state pact with Zurich and then the three state agreement in the Northeast with four other carriers regarding agency compensation, which either bans contingent commissions or provides full disclosure for compensation. How do you feel about the deals, and do you think it will impact Colorado?

Rivera: It’s a really important issue. As I mentioned with auto insurance, whether it’s health insurance, [or] other lines of insurance, I think that a lot of the decision-making power is going to the individual. The individual really needs somebody that he or she can trust when trying to make a decision. Often, it’s that broker, the independent agent, that he or she really needs to rely on. It’s critically important that the person giving the consumer advice about insurance decisions is doing it based on what is in the consumer’s best interests. So it’s important again that they provide [consumers] with good information.

I’m not necessarily against commissions. I tend to be more in favor of disclosure and at least disclosing so the consumer knows what some of the financial incentives are for the broker in those situations. But again, I think the important things in these agreements have been focusing on making sure that consumers are getting the information that they need to get and that they are aware of the financial arrangements that might be in place for the person offering them a product.

Does your state have any agent disclosure laws or regulations for compensation?

Rivera: We have a disclosure [law] that the brokers need to provide [information on compensation] to the consumer. Colorado tends to be more of the opinion that disclosure is important and isn’t as far as some other states in terms of trying to prohibit those types of arrangements.

You have elected a new governor in your state and so you may be exiting your position as commissioner under the new governor. What are your plans post-commissioner?

Rivera: I wish I knew. I have been in the insurance arena for about 13 years now, and its something I enjoy. I particularly like health care policy. So hopefully, something in the health care arena dealing with public policy and government affairs.

Looking back at your term as insurance commissioner, what was most important to you?

Rivera: There were a couple of things, first of all, that were unexpected that I would have never known were going to come up the day I started. One was the largest merger between insurance companies in our state, and the other one was the largest contract termination between a insurance company and provider in our state history. We really had to manage those two major events, and I’m really proud of how we handled both of those.

When I started the job, the real emphasis on things that I had control over was trying to provide good information to consumers. And, as we’ve talked about in Colorado, the switch in our auto insurance system, nationally and in Colorado, the switch to more consumer-directed health insurance, has made it even more important that we provide good information. I’m really proud of the information we provided to Colorado consumers.

The Colorado commissioner is an appointed position. Do you have any thoughts about whether states should have appointed or elected insurance commissioners?

Rivera: You know you can have a great elected insurance commissioner. You can have a great appointed insurance commissioner. A lot of it depends on the person.

My own personal viewpoint is that an appointed commissioner inherently, can be more balanced. That’s not to say that elected commissioner can’t be balanced. But I think anytime you have politics and money going into campaigns, that allows for the possibility that that person might have a less balanced view of regulation. And as you know, regulation requires a balance in making sure you protect consumers but having the right regulatory environment so insurance companies want to participate in your marketplace. So I think inherently that appointed position is more suited for that.

Having said that, one of the things I’ve noticed that directly affects me is the turnover with appointed commissioners, which I think is too frequent. So I like this idea of having some sort of term for the appointed commissioner, whether its four years, five years or six years. It really gives you continuity. It gives the staff some predictability and continuity. So I think appointed, with some sort of term, is the most preferable approach.

It would only have been two years for you, so you’re just barely getting into insurance.

Rivera: Right, so I’m definitely self-interested in that proposal [laughs].

Do you have any thoughts or words of advice for the incoming commissioner?

Rivera: Our mission is to protect consumers, and that’s absolutely the first mission, I think, of every insurance commissioner. But the part I think sometimes we forget is the serving consumers.

In order to serve consumers, you need to have choices for those consumers. In order to have choices, you need to have insurance companies that want to participate in your market. In order to do that, you need to have a good regulatory environment.

So you need to protect your consumers, but you need to have that balance. And you need to have a regulatory environment that insurance companies want to compete in if you really want to serve consumers. So I really think having that balance [between consumers and companies] is my best piece of advice to the new person.

Topics Carriers Auto Legislation Agencies Colorado