Washington Needs an Appointed Insurance Commissioner
1999-19
Insurance is one of the major financial service industries in our state. Each year the people of Washington spend more than $10 billion on insurance of all kinds to protect their homes, families and businesses from unforeseen disaster.
It is also one of the most heavily regulated industries in the state. As a senior official, the Insurance Commissioner is entrusted with enforcing the state’s insurance laws and protecting the public interest. The office oversees 1,350 insurance companies, HMO’s and Health Care Service Contracts. It also monitors the professional standards of 48,000 licensed agents and in 1996 handled 27,322 filings for new insurance rates.
The Insurance Commissioner’s mission is to assure the financial soundness of an industry that provides quality service and a range of products to meet customer needs at a competitive price, something insurers have been doing day in and day out since the state was founded.
At present the Insurance Commissioner is chosen by direct election. Yet given the current problems in the health insurance market -- about 30 insurers have left the state in recent years, and individual health policies are now unavailable in 34 of the 39 counties -- there is a debate about whether this is the most effective way to structure our state government. In fact, some argue that in its current form the office is no more than a political stepping stone to higher elected office.
The current Commissioner has announced a run for the U.S. Senate. Since no incumbent will be running once the current term expires in January 2001, now is the time for the people of Washington to ask: Should the Office of Insurance Commissioner be protected from political elections by making it an appointed position?
The Insurance Commissioner is one of nine elected state officials in Washington (only four states elect more top officers), yet it is the only elected office not authorized by our constitution.
Fifteen other top officials are appointed by the Governor and make up his cabinet. In many ways the work of the Insurance Commissioner is similar to that of these appointed officials.
For example, the Director of Financial Institutions oversees the safety and soundness of 78 commercial banks, savings banks and savings and loans, which together hold total assets worth more than $53.3 billion. Like the Insurance Commissioner, this appointed officer’s responsibility is to protect consumers and guard the stability of a major sector of our economy.
Banking oversight by an appointed official works well, and the public is satisfied with the effectiveness of regulation in this area. Since 1934 there have been only 19 bank or savings and loan failures in the state, the most recent being the Emerald City Bank in Seattle, which closed it doors in July 1993.
Thirty-nine states regulate insurance through an appointed official, and Florida voters, in a recent constitutional reform, just abolished their elected Commissioner’s office and assigned insurance oversight to an appointed official.
An appointed Insurance Commissioner would created greater effectiveness and accountability in government. As Oregon’s insurance regulator points out, with an appointed Commissioner “there is actually the likelihood of greater policy congruency with the Governor’s agenda and with overall state goals.” Such a reform would also:
Take campaign money out of the process of selecting the Commissioner. In the last election, the candidates for Commissioner raised and spent over $797,000, making it the third most expensive race in the state, after Governor and Superintendent of Public Instruction. Being appointed would relieve the Commissioner of the pressure to spend time fundraising and working to get “good press and lots of it.”
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Assure that skilled, experienced Commissioners are appointed. Right now there are only two legal requirements for a person to qualify for Insurance Commissioner: a) be 18 years old and; b) be a citizen of Washington. Using his appointment power, the Governor could insure that the Commissioner had the skills, knowledge and experience needed to do the job.
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Increase accountability. The record shows that elections have not created the greatest accountability in the Insurance Commissioner’s office. Of the 24 elections since the office was created, only three have resulted in a sitting Commissioner being forced from office; 87% of the time the incumbent was either re-elected or retired voluntarily. Further, in its 92 years of existence, party control of the Commissioner’s office has changed hands only three times, in marked contrast to the Governor’s office, which over the same period changed party control 11 times.
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Restore public confidence.An appointed Commissioner would help alleviate the public controversy and distrust that has grown up around the office in recent years. The Insurance Commissioner has been accused of “bashing” the industry and of creating an enforcement climate that is “good for re-election, not good for consumers.” Efforts to ascend to another office draws time and attention away from the Commissioner’s core mission and undermines the effectiveness of the office.
The urgent need to change the way insurance is regulated in Washington is no longer in doubt. The only question is how to institute meaningful and effective reform that improves choice for consumers, without causing further disruptions to the marketplace.
The present Insurance Commissioner is not seeking re-election. As in Florida, this circumstance offers a rare opportunity to reform the way this important state official is chosen without becoming involved in personalities.
Bipartisan sponsorship of Senator Alex Deccio’s bill, SB 6114, gives the legislature the opportunity to make the necessary changes when it convenes in January. Whether insurance regulation reform includes shifting the Office of Insurance Commissioner to the control of the Governor, or whether it continues as an independently-elected office, is something the people and their representatives in Olympia will have to decide.