N.Y. Gov. Hopeful Weld ‘s Insurance Chief in Massachusetts Stirred Controversy

By | October 19, 2005

As governor of Massachusetts, William Weld, a Republican who has said he wants to be governor of New York, helped turn around the state’s workers’ compensation system and introduce some competition into the heavily regulated auto insurance market.

But Weld was mostly a “hands-off” manager of insurance issues who let his controversial insurance commissioner call the shots, including ones aimed at independent insurance agents, according to a report by Insurance Journal.

According to a story in the October 3 East edition of Insurance Journal magazine, Weld’s tenure in the Bay State from 1991 to 1997 was marked by four major insurance issues: the controversial relocation of Electric Mutual Liability Insurance Co., a General Electric subsidiary, to Bermuda; the precedent-setting demutualization of State Mutual Life; a dramatic turnaround in workers’ comp, and the introduction of limited competition in the state-controlled private passenger auto insurance system.

However, as important as these issues were in setting the grooves in Weld’s insurance record, Insurance Journal writes that even more key was the role played by Linda Ruthardt, Weld’s choice for insurance commissioner and a regulator whose style even more than her regulations confounded many.

New York voters face the prospect of a race for governor next year between Democrat Eliot Spitzer, the state’s high-profile attorney general, and Republican Weld, a native New Yorker who is less well known by Empire State voters or insurance leaders.

The story on Weld is part of a series that continues in the Oct. 17 issue with a look at how insurance issues might be handled if Spitzer is elected governor by New York voters.

According to Insurance Journal, Weld agreed with those who saw the Massachusetts insurance industry as an “insiders’ game” in which it was tough for outsiders to score points. Hoping to upset this dynamic, Weld turned to candidates for his state insurance commissioner from outside the state. After his first choice for commissioner, Texan Kay Doughty, resigned under an ethics cloud, he settled on Ruthardt, a former risk manager for Raytheon and the Girl Scouts of America.

The story notes that Ruthardt clashed with the state’s independent insurance agents. Frank Mancini, president of the Massachusetts Association of Insurance Agents, recalls the first time Ruthardt spoke before members of his group. In her opening remarks she told the independent businesspeople, “You will all be out of business in 15 years.”

Mancini said that while agents could gain access to speak with Weld, Ruthardt represented an obstacle. “Her administration of the division was erratic at best,” he said. “She did not have an open door for agents. She felt that independent agents did not add anything to the insurance transaction and would fade from the landscape. She was proven wrong, of course.”

Agents also recall a battle with Weld’s motor vehicles department over a program that permitted automobile dealers but not agents to handle car registrations for insureds.

Despite the battles, Mancini thinks Weld ran a “fair” administration overall. “Weld didn’t make significant changes. He was sort of a ‘hands-off’ guy,” Mancini said.

In addition to the criticism that she shut her door to agents, Ruthardt was also the target of those who contended she was too willing to work behind closed doors with individual insurers.

In 1995, Emlico, or Electric Mutual Liability Insurance Co., came to Ruthardt seeking permission to relocate to Bermuda. Ruthardt held a brief hearing before approving the move. State law said that an insurance company could relocate to another state, which Ruthardt interpreted to include Bermuda.

Within 45 days of its move out of state, the insurer declared bankruptcy. That elicited howls from reinsurers and others that Ruthardt should have know about the company’s near-bankrupt status and its $2 billion in environmental liabilities.

Allegations of secret dealings were also heard when in 1995 Ruthardt gave her nod to a plan allowing State Mutual Life Assurance, a Worcester-based mutual insurer, to transform itself into a stockholder-owned company known as Allmerica Financial Corp. The case was watched closely because it was the first under the state’s new demutualization statute.

Ruthardt invited controversy in the demutualization episode, not so much because of the plan she approved but because she refused to release key documents sought by outside watchdogs until the courts forced her to make them available.

She also got in some hot water for approving, without a public hearing, a plan by Premier Insurance Co. to introduce managed care into the state’s auto insurance coverage. She later withdrew her approval.

Tomorrow: Weld’s Workers’ Compensation Wonder

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