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The Rough Notes Company Inc.



July 24
13:32 2018

Public Policy Analysis & Opinion


Who said insurance public policy is dull and colorless?

The phone rings.

“Hey, Sarge, it’s me. I know some guys who know some people who think you should know something. Usual rules?”

And so it starts again.

When I recognize that voice, I know our conversation is going to be intriguing but probably stressful. The man I know as “Chet DeMoss” is never boring.

I have no idea whether Chet DeMoss is his real name. Sometimes I’ve doubted it. So much blue smoke and mirrors surround this guy that I can never really be sure whether he’s just a voice in my head or an apparition arising from the lingering effects of evenings of my misspent youth in the French Quarter.

The “usual rules” forbid me to use his name in association with a quote, so what does it matter what I call him? He knows the rules for speaking with journalists, beginning with the tripartite nomenclature attributed to Franklin Roosevelt’s press secretary Steve Early: (1) on the record, (2) on background, and (3) off the record.

The Early Framework still exists. “On the record” means that the journalist may use the information and attribute the source. “On background” means that the journalist may use the information but may not use the name of the source but can provide a vague description of the source’s expertise. “Off the record” means that the source provides information to the journalist but he or she cannot use either the information or the source’s name in the story.

While many people want to perpetuate the belief that the “business of insurance” is populated by boring old white guys,I have met some colorful characters over the years.

Journalists should begin every interaction as an on-the-record discussion. If a journalist can learn a bit more by protecting the identity of the source, then going on background is worthwhile and ethical. The same is true of going off the record; however, one learns quickly that in some linguistic traditions, “Can we go off the record?” really means “May I tell you a lie to ruin someone else’s life?”

In the Nixon era, when both dishonesty and whistleblowing achieved new lows and highs, journalists expanded the Early Framework with the subcategory “deep background.” Going on deep background is almost like going off the record, but the journalist will provide little or no description of the source and can use the information in the story. The information must be “powerful good” to receive deep background treatment.

Chet DeMoss lives in the realm of deep background. When he begins one of his pitches, he always asks “Usual rules?” Over many years, DeMoss has provided so many important and verifiable tidbits that we begin our conversations on deep background by default, but he still asks.

Then DeMoss has a maddening tendency to ask to go off the record before launching into some colorful rant about “an operation to scoop up some Spanish gold in the Caribbean before the salvage guys find out.” Or he provides information about a candidate for insurance commissioner “who did some very bad things in Afghanistan.” He knows full well that I have no interest in that kind of information, but he likes to talk. He won’t shut up until I tell him I have to go on the record with all of it. To which he responds with something like “Okay, okay, Sarge! Usual rules.”


I met DeMoss at the first National Association of Insurance Commissioners (NAIC) convention I ever attended. I wandered around the hotel lobby near a temporary 24-hour gratis bar sponsored by a health insurance concern, which welcomed all credentialed NAIC attendees.

In December 1987, very few NAIC attendees thought it strange that a health insurer would offer round-the-clock access to free drinks and smokes. Times have changed, kids.

I heard a voice call out that reminded me of the “Ratso Rizzo” character from Midnight Cowboy. “Hey, Sarge! (He has never explained why he calls me Sarge.) A couple of your troopers look thirsty.” I turned to see a slight man wearing a well-tailored suit.

The man grabbed my arm and explained that a couple of local agents who represented the same company I worked for lacked convention credentials. They could not get past the gatekeeper at the complimentary bar without name badges.

Incredulous, I explained that I was new to the company and did not even have a corporate credit card. There was no way I would risk submitting for reimbursement unapproved convention registration fees, no matter how much I revered every insurance agent on the face of the earth.

“No, no,” the well-dressed man interrupted me. “Go take off your name badge, then go to the registration desk. Tell them you lost your badge, then ask for a replacement. They’ll ask for your name and look up your registration. When they find it, they’ll type out a new card and insert a new badge.” He continued, “Wait a few minutes, then go to one of the people at the other end of the registration area without your badge. Ask for another replacement. Repeat as needed!”

DeMoss was correct; the NAIC did not keep track of replacement badges at that time.

At any moment during a 24-hour period at the convention, anyone who looked at the names on the badges would have found three to five “Kevin P. Hennosys” enjoying cocktails on a major health insurer’s dime. I assure my good and long-time friends at the NAIC that none of these phantom “Kevin P. Hennosys” ever went anywhere near their highly secure working group meetings.

Of course, this introduction gave me an opportunity to talk with DeMoss when I visited the free hooch station. He regaled me with stories of his days as a hired gun regulatory examiner “before they split financial and market conduct.” He expressed an unnatural affinity for firearms and the unlicensed application of truth serums outside the guidelines established in the examiners handbooks.

When DeMoss warned me to stay clear of a treacherous journalist who wore a beard and a cape, I assumed the drink was talking, and I moved along.


Over the past 31 years, I have cultivated a useful network of sources in and around the grimy neighborhood known as “insurance public policy.” While many people want to perpetuate the belief that the “business of insurance” is populated by boring old white guys, I have met some colorful characters over the years.

For sure, the insurance public policy traveling circus attracts its share of scruffy camp followers.

Sure, there are some steely-eyed legal-eagle types, and most of them don’t have a clue about “how the sausage is made.” They believe it’s “important” to attend the NAIC opening reception or the equally useless opening session. (Here is a money-saving tip for home office travel personnel: Any company representatives who insist on traveling to attend those two events are fakers and should not have their travel requests approved.)

For sure, the insurance public policy traveling circus attracts its share of scruffy camp followers. Most of this crowd consists of sycophants who like to stand too close to regulatory personnel and laugh too hard at their jokes. Then, after the regulator beats a hasty retreat, the scruffy sycophant will turn to a company representative and make a dismissive remark about the “communist” who just left.

A smattering of other bands makes the rounds at policymaking rendezvous. Take, for example, the small groups of consumer advocates. For the most part, the corps of consumer advocates consists of earnest experts in some aspect of public policy. They eat lunch together in little packs like the “smart girls” did in high school. They want to believe that all regulators want to serve the public interest, and if they can just explain the data in a “really good” PowerPoint presentation, the industry lobbyists will concede the point.

Sure! Reason will win. Politics is dirty. There is no need to understand politics!

Consumer advocates end up being some of the nicest people one will ever meet. So when the deal comes down, the consumer advocates once again feel a familiar sting of disappointment.

This is not to say that all convention attendees pack their angel wings in their checked baggage. Sometimes we find out that a consumer advocate secretly cavorts with shadowy organizations that meet over breakfast to pray for American military adventures in Indochina or in support of African tyrants who want to put to death gay people. What Would Pontius Pilate Do?

Often insurance lobbyists assume that every consumer advocate will benefit from endless revenue from trial lawyers, who possess a check-writing fetish. As a former consumer advocate, I can assure you that is not the case. The plaintiffs’ bar consists of a self-interested lot who want to see immediate (revenue-producing) results for their money.

Once I was seeking travel funds for some historical research into the horse trading that resulted in the McCarran-Ferguson Act. I went to a politically active plaintiffs’ lawyer and asked for a tax-deductible contribution to a nonprofit organization, which would fund my travel expenses.

The wealthy lawyer explained that he might contribute to my project if I would work in a well-placed reference to a recent Missouri court decision that his firm manipulated to win lucrative jury awards. I restated that my project concerned historical research into a federal law governing the business of insurance in the public interest. He told me that if I wanted $10,000 or $15,000, I could figure out a way to work in a chapter on his expert use of a new legal strategy based on the court decision he mentioned. I left his office without a check.

Yet some consumer advocates don’t worry much about the niceties of accuracy, truth, or even narrative continuity. These pseudo-public advocates rely on money from class action

awards to fund their long-term operations. One could never work with them to build broad-based coalitions with industry and other groups toward a public interest-oriented improvement to law or regulation. Nor would they do the organizing work necessary to provide political cover or exert pressure on public officials. They become known for stretching out debate on policy issues, then agreeing to a few “language tweaks” that their lawyer sponsors thought might be helpful to the latter’s efforts in court.

The Fixers

The most effective participants—for good or ill—in the policy process are the “the Fixers.” In a way, my friend Chet DeMoss represents all the Fixers. Chet looks at policy debates and identifies friends, allies, and the “enemies of my enemies.” No one stays permanently classified in one category.

Unlike registered lobbyists who appear before Congress, the Administration, or state governments, Fixers do not need to disclose whom they represent. Honor among thieves does not establish or enforce many disclosure requirements. If a journalist is looking for useful and verifiable information about how the system really works, however, Fixers make excellent sources.

For example, after hanging around with Fixers for three decades I was advised to take a look at Form 990 financial filings—yes, plural—made by the National Conference of Insurance Legislators (NCOIL).

When the NAIC refuses to make even one financial filing with the Internal Revenue Service, NCOIL files financial disclosures for at least three nonprofit, public benefit organizations that appear to provide funds to NCOIL: (1) National Conference of Insurance Legislators, (2) Industry Education Council to NCOIL Inc., and (3) Insurance Legislators Foundation.

Now where is that number for theIRS? And I wonder what DeMoss knows.

The author

Kevin P. Hennosy is an insurance writer who specializes in the history and politics of insurance regulation. He began his insurance career in the regulatory compliance office of Nationwide Insurance Cos. and then served as public affairs manager for the National Association of Insurance Commissioners (NAIC). Since leaving the NAIC staff, he has written extensively on insurance regulation and testified before the NAIC as a consumer advocate.


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