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Public Policy Analysis & Opinion January junkets Midwinter trip to upper Midwest brings in a harvest of cold facts By Kevin P. Hennosy
In 1991, I worked on the staff of the National Association of Insurance Commissioners (NAIC). I took a trip on the NAIC’s dime that my fellow staff members quickly dubbed “The Junket.” The excursion took me to Bismarck, North Dakota, to visit the state insurance department, with a side-trip to Fargo. At the direction of the then NAIC executive vice president, Sandy Gilfillan, I made the trip in January … to Bismarck … in January. On a number of levels, it is an assignment that I will never forget. The purpose of my visit was to learn about how state insurance departments actually operated. I was there from the NAIC to learn—not to bully or cheerlead for the association. I was sent when the airfares were inexpensive; Sandy Gilfillan was both practical and fiscally responsible, which made her a successful leader. As it turned out, I was lucky. Bismarck was experiencing a bit of a January thaw. Most of the days I was there the mercury shot above zero—just above zero. One day I remember double-digits for a high. One of the insurance department staff expressed disappointment that I “really did not get to experience the Bismarck-in-winter, because it never dropped below minus 34” during my visit. I believe this career regulator was raised by wolves. At the time, Insurance Commissioner Earl Pomeroy and Securities Commissioner Glenn Pomeroy had adjoining office complexes in the State Capitol, and from there they regulated two-thirds of financial services offered in the state. I was there to observe the Pomeroys’ operation. The Brothers Pomeroy developed a public information campaign targeted at high-turnout voters known as senior citizens. Earl Pomeroy, now a six-term member of Congress, was a statewide elected official, who had just finished his term as president of the NAIC in 1990. Glenn Pomeroy was appointed to the post of securities commissioner by the governor and would later be elected insurance commissioner. The two commissioners and a staff member or two would load up a van and travel to senior centers, shopping malls, and other public venues across the state. At these gatherings each Pomeroy would make a brief presentation on his respective portfolio, focusing on senior health insurance and fraudulent investment schemes. One day before sunup, a department staffer picked me up in front of my hotel. It was 27 below zero. I believe I was greeted with a cheery “cold enough for you?” Maybe not. Maybe that’s just what I heard. At the Capitol, the Pomeroys had already drawn a state van from the livery. Thankfully there was some equipment to load, which aided circulation. En route to Fargo, the Pomeroys insisted on a quick stop at a breakfast place near what I believe was their boyhood home of Valley City. The breakfast place was known for giant cinnamon rolls that were gooey with cholesterol and calories. When we arrived at the first “Senior Forum,” the venue was packed with several hundred senior citizens. I wandered around in the back of the room and noted the attention that the audience paid to every word. When the brief presentations ended, the floor was open to questions, which the Pomeroys took great care in answering with individual responses. At the end of the program the two state officials stuck around and mingled with the elderly citizens, some of whom were too shy to ask questions at the microphone. We left the first forum, grabbed a quick lunch, and then visited a couple of radio stations where the commissioners took part in talk shows. They discussed the Senior Forums and promoted the upcoming schedule. Then we stopped at a local television station and the commissioners appeared on a late afternoon local news program. We left the station and drove across town to set up for the next forum at a hospital conference room. By the time the room was set up, darkness had settled on Fargo. I saw a bank thermometer that reported the temperature of 17-below, then 19-below. I wondered what kind of crowd would brave the cold and dark to hear a presentation on health insurance and investment fraud. The Pomeroys packed the room. Now I realize that North Dakotans are a hearty bunch, but I think the Pomeroys fulfilled a need. I believe people appreciated the fact that the two commissioners made the effort. The people who attended were interested and engaged in the presentation. They asked informed questions, and the Pomeroys knew the topic well enough to give them answers. If the commissioners could not answer questions, they took names and phone numbers and they got back with the person—I saw Commissioner Earl Pomeroy return a couple of those calls himself over the next two days. I am sure Commissioner Glenn Pomeroy did the same. One can look at this kind of activity cynically and dismiss it as “politics.” Well it was politics, retail politics. One can use other words for this kind of activity: democracy, public accountability, and public service. By meeting with members of the public, the Pomeroys certainly earned votes for themselves or the governor, but they also earned the public trust. What I witnessed in Bismarck and Fargo during the winter of 1991 was not a theoretical “laboratory of democracy.” It was democracy. People came out in the cold to learn and sometimes to ask for help. They generally did not leave disappointed. Today those of us who work in and around the insurance industry read a lot of public relations pablum about state-based regulation. Most of these declarations waste paper and bandwidth. The people urging Congress to leave insurance regulation with the states do not understand the true strength of the framework. This is now Let’s take a look at where the NAIC spent its time this winter. In late January, the NAIC met at a resort in Boca Raton, Florida. In mid-February, the NAIC threw a “Solvency Summit” at a Disney resort in Orlando, Florida. If you are an insurance commissioner who is lucky enough to be an NAIC officer, you might also have attended the National Conference of Insurance Legislators’ (NCOIL) meeting at a resort and spa just outside Fort Lauderdale, Florida. After the NCOIL meeting, there was just about enough time to exchange some dry cleaning before the NAIC convened at another Disney resort property in Orlando for its spring national meeting. This travel itinerary does not take into account the many speeches at resort locations and overseas trips that the NAIC executive vice president and NAIC officers dole out to commissioners they deem to be “team players,” or take advantage of themselves. At the Solvency Summit a few hundred insurance company and trade association advocates paid to hear a plea from NAIC leaders to understand the need for international travel by commissioners. Why these deliberations could not have been conducted at the regularly scheduled NAIC national meeting is not clear—but a record snowstorm hit the northeast on the same weekend that the Solvency Summit convened. The pitch for international travel was made by Alabama Commissioner of Insurance and NAIC President-elect Walter Bell. “As the globalization of financial services continues to evolve, it has become imperative that we consider what is going on in the rest of the world when discussing critical issues in the U.S. regulatory system,” said Commissioner Bell. “From a regulatory perspective, the NAIC is well positioned to meet the challenges of a globalized financial services sector.” Commissioner Bell discussed the leadership efforts of the NAIC in the International Association of Insurance Supervisors (IAIS), the U.S.-European Union Regulatory Dialogue, and the role of the NAIC in providing technical assistance to open insurance markets around the world, which includes the International Internship Program. “State insurance officials are at the international table with Cabinet-level financial officials from the United States and around the world representing the U.S. insurance marketplace,” Commissioner Bell continued. The Federalist framers of the Constitution like Madison, Hamilton, and Jay who placed responsibility for interstate and foreign trade in federal jurisdiction must have turned in their graves. It is unclear how much of this travel is funded by industry interests through programs like the NAIC International Internship Program and other “cooperative” activities. If the NAIC filed an annual Form 990 statement with the Internal Revenue Service like other large tax-exempt entities, the association’s finances would be more transparent. Maine Superintendent of Insurance and NAIC President Alessandro Iuppa also focused on international issues. Superintendent Iuppa endorsed the “principle-based approaches” to international accounting standards—which invites constant monitoring by American insurance commissioners in locations around the world. He promised that this activity would change the paradigm of solvency regulation—but did not explain how. The NAIC president assured the assembled advocates that the NAIC would expand its “Washington presence” and visit the offices of all 535 members of Congress in the year 2006. Before long, one can expect the NAIC officers to offer those “hard to get” Washington goodies like passes to the House or Senate Gallery or a flag that had flown over the Capitol. Rather than spending time in the comfort of business class seats to foreign capitals, the NAIC leadership might want to spend some time in a senior center or two in Fargo. The true threat to the state regulatory system rests in public discontent with insurance regulation. As the late Speaker Tip O’Neill once said, “All politics is local.” Of course the highly paid consultants in D.C., who were hired by the obnoxiously paid association senior staff in KC, do not want insurance commissioners to believe that. It may not be as exotic to ride from senior center to senior center across the upper Midwest, but you meet some interesting people along the way. These people are called citizens, who vote for members of Congress and other public officials. It’s good to know a few of these kingmakers when political winds are changeable. Personally, I still regret not taking a camera—and bringing home a couple of those gooey cinnamon buns. * The author |
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