Two into One.

Response to our cover article on Jim Wrynn was overwhelmingly favorable toward theSuperintendent, many holding that he has not had much of a term on the job and should probably get that chance. We’re concerned about seeming to “cheerlead” for the Superintendent, but our feelings are exactly as laid out in the piece: we think he has done a reasonable job in a very short frame of time and that he has the kind of balance that would lead to a reasonable regulatory approach. The Department, being as strong a mechanism as it is, to use our metaphor again, is like having a very well practiced and experienced orchestra needing nonetheless a good conductor who changes the emphases periodically but keeps up the beat. Hope you enjoyed the piece. ……In that same issue we made reference to the banking, insurance and consumer protection department consolidation proposed by the Governor in his Inaugural address. It is our feeling, having reviewed the matter with industry leaders, that some consolidation is a worthwhile idea. We believe that banking and insurance departments would do well together as they do in other states, in some cases for many decades, but that the addition of consumer protection implies an emphasis to the new department that may be a bit misplaced. During the course of the past two weeks insurance associations have weighed in, notably RIMS which opposes the combination on the grounds that it will weaken consumer protection: to quote their leader,Mr. John Phelps, “The Risk and Insurance Management Society, Inc. expressed initial reservations regarding New York Governor Andrew Cuomo’s proposal to merge the New York State Insurance Department (NYSID) into a combined Department of Financial Regulation (DIFR). RIMS recognizes the validity of the stated goals, namely reducing costs and increasing efficiency, but it is concerned that the NYSID’S consumer protection mission may be weakened in the process of merging the two departments…..The Insurance Department has the necessary expertise to understand and regulate the insurance industry.” John Phelps is director, business risk solutions, Blue Cross and Blue Shield of Florida, Inc. and board liaison, RIMS External Affairs Committee. The New York Insurance Association spoke out in favor of the merger stating that the funding of industry regulation by companies might be reduced, accordingly, taking away an expense from insurers doing business in New York. According to NYIA, the insurance department is funded by 332 assessments paid by domestic insurance companies. These assessments have grown at a rather alarming rate over the past several years and, according to the release issue by the NYIA, the monies collected are used to fund programs not part of the New York Insurance Department’s operations. By law the assessment should be solely for that purpose, but what is known as sub allocating has resulted in other state agencies profiting from insurance monies. “We applaud Governor Cuomo for his efforts to reduce state spending,” Ellen Melchionni, president of the New York Insurance Association (NYIA) said. “Since the insurance and banking departments are funded by the respective industries these entities regulate, we look forward to a reduction in the assessments levied on New York businesses… ..Since 2008 the assessments on domestic insurers have nearly doubled and the sub-allocations have nearly tripled,” Melchionni said. “NYIA filed a lawsuit against the state last year to end this illegal practice. The suit is ongoing.”The insurance industry, NYIA points out, is a vital component of New York’s economy, employing more than 185,000 New Yorkers. The industry contributed $32.4 billion to the gross state product (GSP) in 2007, accounting for 3.4 percent of the state GSP. The Insurance Advocate holds that New York State must continue to be friendly toward insurers reducing expenses everywhere possible. The regulatory environment must be kept crisp making melding a department of financial regulation together with consumer protection, whose mission probably includes so many areas of concern, a possible dilution of the NYSID’s excellent arm for oversight. Much of banking oversight is federal, so New York State’s banking department might be about 1/3 of the new department. We like the two combined, period.