Insurance makes the world go round. So it’s no wonder that politics—something else that causes the globe to spin—consistently transforms the insurance industry. The sea changes that can occur at election time reverberate on the both the state and federal levels, and the 2014 mid-term elections were no exception. Not since 2008, when the industry was poised over a precipice of change and Barack Obama appeared to be covering the nation in a purple haze, has a national election created such a firestorm of controversy.
Welcome Back Cotter
The effect of the 2014 election on the insurance industry was one of the agenda topics at the 2014 Insurance Forum, sponsored this year by JVP Partners, Inc. and Sidley Austin LLP. The speaker regaling the crowd about what the election results mean for our industry—and what impact those results will have on insurance for the coming years—was Dan Cotter, Vice President, General Counsel & Secretary for Fidelity Life Association. Dan definitely knows a thing or two (or three) about insurance compliance and his comments from the dais are always spot-on.
Here Come the Feds
In his characteristically low-key fashion, Cotter pointed out that despite what all the talking heads were saying, the 2014 election was not that big of a mover, at least at the federal level. Yes, an unprecedented amount of Democratic seats were lost at the State level and in the United States Senate, but apparently this is hardly anything new. Taking the view that the loss of Democratic seats is merely an example of history repeating itself, Cotter pointed out that if the lazy news media had done its homework they might have found this handy little Wikipedia chart listing historical mid-term election results going back to 1910, which shows that incumbent Presidents have only gained house and senate seats a mere three times (FDR in 1934, Bill Clinton in 1998, and George W. Bush in 2002) in the past. By putting things into historical perspective (and doing his homework) Cotter demonstrated that this election may not have been all that, in spite of Barack Obama’s loss of 17 total seats in the House and Senate.
The question still remains whether the increased number of Republican seats on Capitol Hill will have an effect on some controversial federal legislation, in particular the Affordable Care Act, TRIA, and Dodd-Frank as it relates to bank-centric regulations and the status/power of the FIO.
In view of Congressional attempts to repeal Obamacare more than 50 times, and the U.S. Supreme Court’s decision to hear another ACA-related case, Cotter opined that we may see some additional movement now with respect to the nation’s controversial healthcare law.
Cotter also talked about TRIA being at a standstill, and the industry’s expectation of a short-term fix to permit Congress to take a deeper look in 2015. Everyone expected some sort of last-minute sunset. And you could have knocked me over with a feather when I learned today about the Senate’s failure to vote on legislation to extend the federal terrorism insurance program. Since this is the least productive Congress the nation has had, passing the lowest number of bills of any Congress in 20 years, (more historical homework from Dan Cotter) perhaps this inaction on TRIA should not come as no surprise.
With respect to the FIO, Cotter emphasized the current industry focus on international issues, capital insolvency, ORSA and the like, and stated (correctly in my view) that the real question will be what authority Congress gives the FIO and what topics the FIO feels it has a prerogative to be involved in. [Author’s note: for additional background on the FIO, see my article The FIO’s 2013 Modernization Report: Pulling Back the Curtain on the Great and Powerful Oz, recently published by LexisNexis.]
Back Home in the States
With respect to the industry impact generated by the state-level mid-term election results, Cotter once again took an historical perspective. There hasn’t been much shift in state offices since 1986, and the pendulum swings back and forth with what Cotter called “comforting regularity.” During the 2014 November elections, 20 governors who appoint their State’s insurance regulator were reelected, so this top industry post is unlikely to change in the States of Alabama, Colorado, Connecticut, Florida, Idaho, Iowa, Maine, Massachusetts, Michigan, Nevada, New Hampshire, New York, Ohio, Oregon, South Carolina, South Dakota, Tennessee, Vermont, Wisconsin and Wyoming.
A few key places where the pendulum might swing with some noticeable cause and effect are at the National Association of Insurance Commissioners and in the 10 States that experienced political party changes in the Governor’s office, in particular Kansas and Illinois. Cotter’s predictions in this regard are based upon his basic view that insurance departments at the state level should have dual balancing goals. While departments exist first and foremost to protect consumers, at the same time we have an industry that is one of the biggest employers in most states and provides something that is necessary to consumers. After 28 years, Cotter has learned that the most effective insurance departments are the most practical; the regulators who sit down with the regulations and the insurance code and come up with reasonable, practical solutions to the issues at hand that help consumers and promote the health of the industry are, according to Cotter, the backbone holding up the industry.
Cotter used this catechism to predict what effect the 2014 election will have in Pennsylvania, where incumbent governor lost a reelection bid for the first time since 1854. Cotter posited that there was nothing to suggest that Democratic Governor-elect Tom Wolf won’t hang on to Michael F. Consedine, who Tom Corbett appointed as Insurance Commissioner in 2011. This inquiry involves much more than healthy curiosity about politics in the Keystone State, since Commissioner Consadine happens to be the NAIC’s 2015 President-Elect.
Cotter also looked to Kansas as an example of non-partisan, consumer-oriented politics. Although voters elected Republican Ken Selzer as their new insurance commissioner, Sandy Praeger—the long time Republican power in that state’s top insurance office—had supported Democratic candidate Dennis Anderson, which in Cotter’s view constitutes evidence of an industry development driven not by political cronyism, but rather with a view towards fair and balanced regulation. Cotter posited further that Sandy Praeger’s failure to endorse the candidate from her own party may be a sign of how the minds of some long-time NAIC folks may be thinking.
The consumer-focused, non-partisan attitude that provided depth to Cotter’s comments about Pennsylvania and Kansas did not enter the equation when his commentary turned to Illinois, where Republican Bruce Rauner upset incumbent Democrat Patrick Quinn in a hotly contested Governor’s race. The Governor-elect has talked about shaking things up in Springfield, and he may have some ability to do that at the Illinois Department of Insurance and other state agencies. However, Cotter didn’t pull punches (that’s the way we like it here at Straight Talk) when he reminded the Insurance Forum audience that the Democratic majority in the Illinois Senate held its own in 2014 with the loss of only one seat and that the House Democrats actually gained seats, thereby creating a super-majority of 71-47. Anyone who has been in Illinois for any period of time (and Cotter is one of those people) knows that if a n00b thinks they’re going to come in to office and shake things up, it’s going to be a long train ride home because frankly the chief executive of the State won’t move an inch off square one without working with the Illinois House and Senate. Cotter didn’t think there was any good reason for Illinois Insurance Director Andrew Boron to be moving on. Others are already creating lists with names of possible replacements.
The remaining eight States with political party changes in the Governor’s office—namely Alaska, Arizona, Arkansas, Hawaii, Maryland, Nebraska, Rhode Island and Texas—will most likely not experience the unique brand of politics that gets played out in Illinois. But like Illinois and Kansas, the changing of the guard in these States could have an impact on Medicaid expansion, NAIC leadership and international insurance matters.
Play Nice or Go Home
I live in Chicago, where Democrats and Republicans are kind of like the Cubs and the White Sox—both sides do the same thing for a living but go about their business in very different ways. The leaders of today’s insurance regulatory system simply cannot afford to take sides along party lines and should instead focus on finding common ground now that the feds and the international community continues to turn its collective eye towards transforming the U.S. insurance market. While bi-partisan insurance regulation may certainly be better for consumers and insurers, the bi-partisan approach is also the state-based system’s best chance of survival.