Insurance Transparency Project

I-Pals,

That’s pretty good line from Walter Bell, Alabama’s insurance commissioner who himself is not known as a firebrand. He was talking about the Potemkin regulatory regime overseen by the National Association of Insurance Commissioners, the N.A.I.C., based in Kansas City, Mo.
When your own members are mocking you, Missouri, you have a problem.

But while the NAIC dithers, the gulf states are moving forward toward a consensus that the current system is broken.

In this Rebecca Mowbray story in the Times-Picayune on an insurance conclave of regulators, insurers and others in Mobile last week, non-firebrand Insurance Commissioner Jim Donelon, of Louisiana, describes the relationship between ratings agencies and modeling companies, which purportedly “predict” the likelihood of future hurricanes purportedly based on science, “self-serving and incestuous.” He also calls for greater transparency in the unregulated mostly offshore reinsurance business, which has a big say in setting insurance rates.

That’s new.

Even South Carolina’s Scott Richardson, a self-described free marketeer who says insurance should be regulated as little as possible, says in this situation, “as little government regulation as possible might be a lot.”

And, as Mowbray writes:

But perhaps Florida Insurance Commissioner Kevin McCarty stated it most plainly: “The current policy we have is a failed national policy.”

The question is what to do about it. Reasonable minds disagree. Even the most radical proposals strike ITP as piecemeal, but they are far better than nothing.

This is the backdrop to the apparent momentum gathering around the Taylor Bill, Rep. Gene Taylor, D-Miss., proposal to add wind coverage to the flood program, which would give customers options along the coast.

Insurers are against this, saying it would displace the private market.

ITP says: This is a bed insurers have made.

A tired Rep. Gene Taylor said after Thursday’s hard-fought vote he was “obviously, pleased.”

“We’re grateful for every bid (1) of help we got,” he said. “We also realize we’re only halfway there.”

Looking to the Senate, Taylor says Lott’s support of the multi-peril concept, with backing from GOP Gov. Haley Barbour and possible support from Sen. Thad Cochran, R-Miss., would be “about impossible to beat.”

Asked what timing he had in mind for the legislation, Taylor said, “I sure as heck would like to have it available for consumers before the next hurricane season.”

How was Taylor going to celebrate? “There will be beer and Mexican food,” he said with a laugh.

That is one well-deserved taco, I’m sure.

No word on whether President Bush will sign it.

ITP appreciates the need for a real-world fix for policyholders along the coast. This would be no small achievement.

ITP, however, would urge Taylor and other backers not to lose sight of the transparency imbalance, the once that allows insurers to examine policyholders’ credit as if via an x-ray, while policyholders cannot compare even the rudiments of insurer performance on claims. A transparent, open market would go far toward discouraging bad behavior on claims and squeezing out the crazy inefficiencies in distributing and administering insurance.

ITP’s War Eagle always keeps his eye on the horizon.

1. Sic. ITP is not sure whether that’s a typo or honest effort to capture Rep. Taylor’s accent. We’ah grateful fo’ eva bidda hep wuh got.