Property and casualty insurance companies and their customers will be best-served by maintaining and improving the current system of state oversight rather than creating a new federal bureaucracy, according to John Bykowski, who was recently named as chairman of the National Association of Mutual Insurance Companies (NAMIC) board of directors.
Bykowski also is president and chief executive officer of Secura Insurance, based in Appleton.
Bykowski recently spoke before a federal hearing on the need for insurance regulatory reform before the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises of the House Financial Services Committee. A bill introduced last year, named H.R. 3200 or the “National Insurance Act of 2007,” would have established an optional federal charter modeled on bank regulation.
“It’s not our goal to sing the praises of state regulation,” he said. “There are many states that need reform. But we believe that a federal (system) would be very difficult for companies.”
In states such as Wisconsin, which has an active Office of the Commissioner of Insurance (OCI), insurance companies have regular contact with state regulators and enjoy an easy rapport with them, Bykowski said.
“I can pick up the phone and call the Insurance Commissioner of Wisconsin and talk to him about my concerns,” he said. “And he can call me. His predecessor visited Secura and a number of other organizations. With the federal government, where would they begin?”
State insurance regulations are able to consider local risk factors such as weather conditions, tort law, medical costs and building codes. Federal legislation and oversight would need to account for such variations, he said.
“We see a lot of concerns to go along with that,” Bykowski said. “And federal bureaucracy, no matter which way you look at it, is scary. The insurance regulation system has been in place for more than 100 years, and each (state) has its own unique laws and circumstances. The laws have developed over time in place and reflect the local flavor of the industry.”
While state oversight is preferable to federal oversight, Bykowski said some changes are needed to make operations more uniform from state to state. Insurance companies now run into problems with lack of uniformity between states in producer licensing regulations, forms and restrictions in underwriting that prevent accurate risk assessment.
Price regulation should be ended for all property-casualty insurance lines, Bykowski said. Some states have reformed price controls in recent years, but more states should take action, he said.
“Since 1969, Illinois has had deregulated competition-based pricing for both personal and commercial lines,” Bykowski said in his testimony. “As a result, Illinois has experienced stable rates and few entrants in its residual market because it has attracted the largest share of private passenger auto and homeowner insurers in the nation.”
Instead of federal oversight, the NAMIC would prefer consistency and uniformity between states and their insurance regulations, he said.
“Some states are very open, and that’s where you find the most competition,” Bykowski said. “It’s a lot easier to get things accomplished in Wisconsin than other states.”
Wisconsin’s insurance market conditions make it a good place to be an insurance consumer right now, Bykowski said.
“The market is extremely competitive,” he said. “(Insurance) companies have done well over the last few years and are looking to grow. There are very favorable rates out there now.”
Titles: President and CEO, Secura Insurance, Appleton; board chairman of the National Association of Mutual Insurance Companies.
Past experience: Senior vice president of marketing, West Bend Mutual; vice president of casualty operations, Wisconsin Employers Group
Web sites: www.secura.net; www.namic.org