Switching Sides: Many ex-insurance commissioners go straight to industry roles

This year's annual summer meeting of the National Association of Insurance Commissioners was interrupted briefly by protesters demanding action and accountability. One of their demands was  "No lobbying of former colleagues or departments for at least two years after leaving public office."

While the Public Citizen-led protest in Minneapolis passed with little notice, it tapped a well of concern for many in the insurance industry.

The business of insurance faces serious challenges, including climate change, artificial intelligence, and private-equity investment that, at times, lacks transparency. But what is most concerning to many is the cozy relationship between state insurance regulators and industry trade associations.

It is not unusual for insurance regulators to utilize rule language or studies provided by industry trade associations. What's more, many regulators join the insurance industry in plum C-suite roles after completing their regulatory term.

“I never walked into any room at the NAIC, unless it was a regulators-only meeting, where the room wasn't completely and utterly dominated by industry lobbyists,” said Robert Herrell, executive director of the Consumer Federation of California and former deputy insurance commissioner for nearly six years. “This is a bit of an overstatement, but the NAIC essentially acts, more often than not, as a glorified trade association in addition to the ones they already have.”

As a result, confidence is not strong in state regulators having the independence, strength and commitment to steer the insurance industry through present challenges.

Advocacy organizations, academics, and law firms have detailed how a “revolving door between the insurance industry and regulators creates a dangerous cycle that undermines consumer protections, threatens the objectivity and strength of regulatory oversight, and tilts policy toward corporate interests,” Public Citizen said.

“In short, the fox is guarding the henhouse,” the organization concluded.

Conflicts of interest?

InsuranceNewsNet found that 24 of the 50 insurance commissioners in office a decade ago went directly into the insurance industry. A typical landing spot saw a former commissioner become vice president of regulatory affairs for an insurance company or industry trade association.

Six ex-commissioners immediately formed consulting firms to lobby on insurance issues.

Of the remaining 2015 insurance commissioners, 12 retired from the job and four are still in office: Dean Cameron, Idaho; Larry Deiter, South Dakota; Mike Chaney, Mississippi; and Sharon Clark, Kentucky (left office and was re-appointed in 2020). Several others were tabbed to lead other government agencies.

Thirty-three states have laws that restrict former legislators from immediately becoming lobbyists, with cooling-off periods ranging from one to two years, Public Citizen noted.

The group delivered a petition with over 4,300 signatures calling for increased transparency, elimination of conflicts of interest, and closing the “revolving door” of commissioners joining the industry.

Anti-Corruption Pledge demand

Public Citizen demanded that “every insurance commissioner adopt an Anti-Corruption Pledge that applies to all commissioners and their immediate families.” It calls for a ban on gifts, meals, travel, campaign contributions and job negotiations and offers while in office. And no lobbying for two years after leaving office.

Nobody signed the pledge, said Rick Morris, insurance campaigner with Public Citizen’s Climate Program.

“Regulators are supposed to stand for the public interest over corporate power,” Morris told InsuranceNewsNet. “But as climate change alters the risk landscape, it seems like they're just handing the pen to the insurance industry to write the rules to suit the insurance industry's bottom line. This goes well beyond simple regulatory capture. It’s regulatory surrender.”

The Public Citizen protest came on the heels of a report it co-authored with the Revolving Door Project finding that, among the big U.S. property and casualty insurers that publicly report executive compensation, C-suite pay is on a meteoric rise.

At nine of the top 25 homeowners insurance writers—comprising 24% of the market—42 executives took home a collective $310 million last year, up 21% from 2022. That’s more than $7 million per executive on average.

“Between the revolving door among the insurance industry and commissioner offices, lavish gifts and trips, and suspicious campaign finance, this body has been captured by the industry it is supposed to regulate,” Morris said. “When the fox guards the henhouse, the hens get eaten. At a time when more people are struggling to make ends meet, this is unacceptable.”

NAIC conflict policy

Public Citizen based its anti-corruption pledge on various state laws, Morris explained, as well as the STOCK (Stop Trading on Congressional Knowledge) Act passed by Congress in 2012. The law prohibits members of Congress and other government employees from using material, non-public information obtained from their official positions for private profit. It requires timely public disclosure of the financial transactions of members and their staff within 30-45 days.

The NAIC does have a conflict-of-interest policy, but it is silent on regulators leaving public service to immediately lobby their former colleagues. Morris calls it so “toothless and unenforced” that it is virtually ignored.

Repeated attempts to speak with NAIC President Jon Godfread, North Dakota insurance commissioner, about the Public Citizen protest and conflict-of-interest issues were unsuccessful.

The NAIC sent this statement instead:

“Every state insurance regulator operates under the ethical and constitutional statutes established by the state in which they serve. In addition, as a member organization, the NAIC has a longstanding conflict of interest policy that applies to the organization, its events, and activities. This framework ensures that regulators, whether elected or appointed, are subject not only to the governing laws of their respective states, but also to the commitment of the NAIC to uphold the highest standards of transparency and integrity.”

Editor's Note: This is the first article in an ongoing, occasional series that will look at the movement of insurance commissioners and other regulatory officials into plum corporate roles or lobbying posts after leaving their regulatory positions. 

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.