A Good Fight
In this issue of the Insurance Advocate, I have taken the liberty of publishing an editorial that has gained quite a bit of attention with respect to the long-term implication of Ultimate Fighting in New York State. The long-term implications range from the further dumbing down of civility in our society to the power of regulation and its limits on that civility — it appears on page 40. Insurance depends so much upon prevailing social, regulatory and common value that there seems to be value to this advocacy… Agree? Also in this issue, we give Michael Loguercio a little latitude in discussing an increasingly common set of claims relating to intimate activity among adults. While the subject may be construed as a titillating one, Michael’s approach and what he has included is attention getting and worth the read. We also note that this is an anniversary for Michael’s participation in the Insurance Advocate and we are pleased to present his work with each issue and would like to thank him for his extensive volunteer work in the insurance community!
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One of the most eye opening attacks on the process of borrowing from the New York State Insurance Fund to solve Albany budget problems appeared in the Wall Street Journal in its April 6th issue. We excerpt:
“In New York, the real political scandal is what’s legal. New Yorkers have been treated this week to almost daily political perp walks, as a parade of office holders have been rung up for bribery and other crimes. The big news here is that they were caught. The bigger scandal in the Empire State continues to be what the politician’s do that’s legal. “Witness Governor Andrew Cuomo’s $1.75 billion raid of the State’s workers compensation fund to finance more spending. This year’s budget expropriates $500 million from the State Insurance Fund for a “transformative capital” program – details still to come – and $1.25 billion to cover general fund expenses through 2016. Tapping off-balance sheet accounts is an old budget trick, but Mr. Cuomo has added some creative twists. “During the 1980s and early 90s, Albany swiped $1.3 billion from the State Insurance Fund, which is supposed to be the insurer of last resort for small businesses that can’t obtain affordable policies on the private market. The state issued the fund an IOU, which remains on the fund’s balance sheet as an asset though realistically it’s worth about as much as the Argentine peso.”
“Due to a public backlash against the raids, Albany passed a law in 1996 forbidding the state from transferring money out of the insurance fund. But laws enacted by one legislature can be undone by another. And this year’s budget authorizes the state “notwithstanding any law to the contrary” to transfer excess reserves out of the fund totally $1.75 billion.” “Insurance advisory firm Assured Research warned earlier this year that a “tsunami of social and economic forces” including an uptick in medical inflation and claims could wipe out the State Insurance Fund. While the fund reports a $2.8 billion surplus, this too is an Albany accounting fiction. State law mandates that the insurer discount its liabilities at a rate of 5% rather than the more prudent 3.5% that other private and state insurers use. According to Assured Research, the State Insurance Fund would be $6.9 billion in the red were it not recording the state’s $1.3 billion IOU as an asset and undervaluing its liabilities.” We have seen, for many years, agents’ associations and other groups oppose this band-aid bonus for the State’s budget from insurance dollars and we all understand the effects it has on the insurance business, on agents and on the WC marketplace itself. We agree with the Wall Street Journal, but note that Cuomo is hardly the first Governor to write this unusual, supplemental cheque.
