N.Y. Supt. Mills Defends Contingencies; Reports on Risk-Based Exams

January 23, 2006

New York State Superintendent of Insurance Howard Mills defended contingent commissions and reported progress in moving his regulatory agency toward risk-based market conduct reviews of insurers.

He also shared his views on a national disaster plan during the Professional Insurance Agents of New York State Inc.’s 14th annual Metropolitan Regional Awareness Program in Brooklyn.

“Contingent commissions have been around for a very long time. They are legal,” he said, “And no one, even the attorney general, has ever said they are not.”

He took issue with those who have called for detailed disclosure by agents of their competing quotes. Mills maintained that it is that it is agents’ job to evaluate and help consumers make the best decision in purchasing insurance. “Does disclosing ‘every single quote’ truly service the consumer? I believe you could argue no,” he said. “This can be a mind-numbing industry, and it would be a disservice if you went to that type of extreme form of disclosure.”

Mills argued further that price is not always the best determinant in deciding what is best for tan insured. He said his agency’s job is to ensure transparency for customers while also working to “calm the waters, and monitor and regulate the industry without regard to the possibility of headlines.”

Mills said that he is making progress on forming a corporate practices unit within the insurance department that will examine insurers as market conditions and needs dictate, rather than just periodically regardless of market conditions as has been the practice. This unit’s attorneys will examine the market and investigate licensees’ business practices as Attorney General Eliot Spitzer’s office did during its probes, he said.

“The NYSID now is moving to a risk-based examination process, enabling it to investigate companies on a ‘need-to-be-done, risk-based practice,'” he said, with the goal of allowing regulators to better deal with investigations.

Mills discussed his collaboration with his counterparts in California, Florida and Illinois to develop a “three-layered,” national disaster plan. This plan would include tax incentives to allow for deductible contributions to augment the industry’s reserves, a regional or state catastrophe plan modeled after California’s, and, lastly, a federal backup.

With regard to the current national approach to catastrophes, Mills said, “We can’t continue to fall into the trap of the political process… We need to get the industry more premium dollars, not tax dollars.”

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