New York Attorney General Eliot Spitzer, who is running for Governor in his home state, has painted his critics as defenders of corrupt practices and not true champions of free enterprise.
He also has sought to refute the idea that strong enforcement of laws and regulations is bad for business.
Spitzer’s gubernatorial candidacy has spurred interest within the insurance industry about what insurance politics and regulation in the Empire State might look like if he is elected to succeed Republican George Pataki. Insurance Journal tackled the subject in a story in its Oct. 17 East edition.
Ernie Csiszar, president of the Property Casualty Insurers Association of America, has blasted what he called Spitzer’s “corporate terrorism” approach. U.S. Chamber of Commerce President Tom Donohue called his settlements with businesses ” the most egregious and unacceptable form of intimidation that we have seen in this country in modern time.”
State GOP Chairman Stephen Minarik has claimed that Spitzer’s high-profile investigations are “making it harder to do business and create jobs in New York.” His political opponent William Weld told The Associated Press in August that Spitzer “has a marvelous public persona right now, based 100 percent on terror power, the power of ruination.”
Response to critics
Spitzer has dismissed these critics. “Those who supposedly speak for the free markets refuse to acknowledge that we’ve been right in these cases,” he has countered. “Instead, they recede into a shell of ossification, pretending that these issues should not have been addressed in the first place.”
In a commentary in the Wall Street Journal, Spitzer explained why he thinks such powerful interests oppose his methods:
“Part of the reason is a mistaken belief that enforcement is bad for the economy. This is a major misconception rooted in an outdated ideology that fixates on examples of intrusive government regulation in the distant past.
“Today’s situation is qualitatively different. We are now combating a series of problems arising almost exclusively from the abandonment of basic concepts in business ethics – concepts like fiduciary duty, transparency, accountability and fair play. This conduct betrays the core principle of our economic system: full, fair competition. Prosecutors are compelled to respond, and they have done so in ways that are targeted and measured.”
While many are still upset with what they see as the reputation bashing of the entire industry for the faults of a few, more and more insurance executives are acknowledging that the upheaval caused by Spitzer could benefit the industry.
“I think out of this comes a better industry with better companies,” Stephen Lilienthal, chairman and chief executive officer CNA Financial Corp., said at Standard & Poor’s 2005 annual insurance conference in New York in June. “In the short term, I think you are going to get a very cumbersome and intensified process with a lot of internal focus, but in the long run, we come out of it better.”
“At the end of the day this will create a more transparent industry and I welcome that,” said Brian O’Hara, XL Capital Ltd., chief executive officer.
According to Insurance Journal, in an age when many business and political leaders continue to argue for deregulation, Spitzer has stressed applying existing regulations, arguing that government needs to be a more effective enforcer of rules so that free markets operate fairly for all businesses and consumers.
In remarks before the National Press Club in January, in which he spoke of the influence on him of “trust busting” Teddy Roosevelt, the AG said:
“Business, in many cases, will descend to a lowest common denominator. And if we believe that the market depends upon integrity and fair dealing, then government must step in to make sure that the rules are honored.”
Spitzer has tended to favor strong oversight at both the state and federal levels. He has argued that some problems within the largely state-regulated insurance industry such as offshore entities and rate making practices may require federal intervention. He has also hinted there is a need for minimum national standards for insurance professionals.
He supports repeal of the limited McCarran-Ferguson antitrust exemption enjoyed by the insurance industry. In comments submitted in July to a federal commission, Spitzer wrote:
“The exemption has interfered with the ability of public and private enforcers to readily use the full panoply of federal antitrust remedies to correct, deter and obtain compensation for abuses in the insurance sector. A uniform federal antitrust standard would facilitate antitrust enforcement and benefit plaintiffs and defendants alike, in contrast to disparate actions, under different laws, that may yield inconsistent results.”
At the same time that he advocated repeal of the federal antirust provision, Spitzer defended state insurance regulation, arguing that ” a repeal of the exemption should not require preemption of state regulatory systems, which comprehend far more than antitrust policy, and are consistent with a preference for competition in this critical sector of the nation’s economy.”
The Insurance Journal report also looks at where Spitzer stands on New York insurance issues. The AG’s stands on insurance issues are largely a mystery at this early stage of his campaign but his willingness to avoid taking one particular stand is actually encouraging as far as insurance agents are concerned.
Ellen Kiehl, assistant executive director for government and industry affairs for the Professional Insurance Agents of New York, notes that
Spitzer has never supported a legislative mandate to prohibit all contingency fees or mandate disclosure by all agents.
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