Holland intends to keep ‘raising the bar’ for ethics and integrity

By her own admission, Kim Holland has worked hard as Oklahoma’s insurance commissioner to bolster the public’s confidence in the department she took command of in early 2005. Appointed by Gov. Brad Henry after the resignation of former commissioner, Carroll Fisher, Holland set out to “raise the bar” with regard to integrity and ethical practices for both the Oklahoma Department of Insurance and the insurance industry in her state.

Holland, whose grandmother was an agent for New England Life Insurance Company, is the second woman to serve as Oklahoma’s top insurance regulator. As a former insurance agent with more than 20 years’ experience in a multi-lines independent agency, many of which she served in a management role, Holland feels she has a good working relationship with independent agents in her state.

In this interview with Insurance Journal’s Andrew Simpson, one of 15 with regulators at a recent meeting of the in National Association of Insurance Commissioners, Holland discusses broker compensation issues, transparency, changes within her department, legislative initiatives, the problems of the uninsured in her state, climate change and more.

You have vowed to upgrade the integrity and the accountability of your department–could you provide a status report on how that’s going?
Holland: As you know I entered into this office as a result of the resignment of our former commissioner who actually is now serving a sentence as a result of his activity in the office. So we had some major efforts to undertake to restore the public’s confidence in the role of the insurance commissioner as well as the role of our department. And I’ve worked very, very hard to make sure that our consumers and our insurance industry know that we’re serious about the job that we’re doing.

First and foremost we instituted some very stringent ethics policies within the Depart-ment of Insurance, which I’m happy to say my employees have embraced and carry out diligently. But we also instituted a regular communication process with our insurance industry and expanded our consumer advocacy processes. We want the public to know, we want our industry to know, that we’re not only an open book and we’re transparent, but we’re earnest and anxious to make sure that we’re providing the support and assistance that we’re required to do and that we feel is important to provide for the benefit of our citizens.

Is the job done or are things that you need to put in place?
Holland: I think it’s like moving a battleship; I think it happens slowly. The fact of the matter is you don’t change a culture or processes that have been neglected for many, many years overnight. So we’ll continue to refine it. We’ll continue to work on it.

We’ve developed, for instance, and instituted a strategic planning process this last year that engaged all the employees of the department in a process of quality management and improvement, and we continue to monitor and benchmark that on a regular basis. So we’re monitoring our progress, we’re measuring our progress on a regular basis and … surveying our consuming public and all of our customers, insurers and policy makers. … We’re getting positive feedback, or not, about the progress we’re making so we can make adjustments along the way. But we’re going to continue working on raising the bar at the Oklahoma Insurance Department on a regular and an ongoing basis.

Are there other specific insurance issues that you have made a priority for your tenure?
Holland: Absolutely. First and foremost the issue of uninsurance in the state of Oklahoma in two areas in particular. First of all health insurance. That’s a problem obviously across our country but in Oklahoma we have one of the highest rates of uninsurance in the United States. Literally, 21 percent of our working Oklahomans do not have health insurance and that’s an issue that I’ve undertaken a number of steps to try to build consensus and to foster dialogue about what policies need to be undertaken in the state of Oklahoma to improve that issue. So that will remain my number one priority to work with our legislature, to work with consumers as well as the industry to solve that very serious problem.

The other problem I assume is auto.
Holland: It is indeed. We have a very high rate of uninsured drivers in the state of Oklahoma, although we have compulsory insurance laws for auto insurance we still are challenged with a low-income population and a number of other factors that are contributing to the fact that a lot of folks just simply are not buying the coverage that they’re required to buy and really need.

Do you have a new tool to combat that?
Holland: This last legislative session we were able to gain approval for a new automobile verification process that will allow instant verification of insurance status at the point of detainment. At this point, unfortunately, if a law enforcement officer pulls someone over they have to rely on a paper security verification. In Oklahoma those are easily counterfeited or someone can obtain it, cancel their insurance right away and the officer won’t know if that coverage is in force or not. This verification process will allow our law enforcement officers to contact their dispatch and obtain instant verification of the in-force status of their coverage. We think that will create a higher level of accountability with our driving public, as well as a better opportunity to really grapple with and identify the challenges people are having in obtaining insurance and why is it that they don’t have coverage.

How long will it take to get that verification process up and running?
Holland: Probably about six months is my guess, if not a little longer. We have to obviously go through a request for proposal process and a purchasing process to get that done but it’s a high priority so we’re going to prioritize it.

Could you explain your mediation system, the Eagle Program, and how you think that’s going to help insurance costs?
Holland: One of the most important things that we do at the Oklahoma Insurance department is to act as an advocate for our consuming public. We’re frequently an intermediary between our consumers and our insurance industry on claims resolution. In fact in Oklahoma last year alone we recovered over eight million dollars on behalf of policyholders in disputes with their insurance companies. Now, a lot of times those disputes are merely misinformation or a lack of understanding of a claim filing process, or sometimes things just “fall through the cracks” at an insurance company.

We’re glad to act as that intermediary; but sometimes that doesn’t work. So we have an intermediate step before it might be turned over to an attorney, for instance. We have trained mediators on staff. An insurance company, as well as a policyholder, may ask for mediation. There’s no cost to either party. [Our trained mediators] sit at the table with both the consumer as well as the insurance company and mediate a resolution that we hope will be satisfactory to both parties and eliminate the need for using our legal system or our courts system to solve those problems.

… We’re actually choosing to not only put more support behind it but also to promote it more effectively because it has not been utilized as much as we would like. We really think it’s an excellent tool for both the consumer as well as the insurance industry to resolve a complaint without a lawsuit.

What’s new from the legislature in Oklahoma these days?
Holland: Oklahoma is very proud to be one of the first 26 states to sign on to the NAIC’s interstate compact. That, we believe, is going to make major strides in creating a more uniform process for filing for our insurance companies. What we do know is that we have to maintain a competitive pro-business environment, streamline our processes to reduce costs to our insurance companies so that can be passed on in lower premium costs to our policyholders. I’m very excited and very pleased that my legislature recognized the importance of that bill and unanimously supported its passage. It was signed by our governor in April, almost two months before the end of our legislative session.

What does your omnibus bill that you got passed accomplish?
Holland: It has a whole wealth of consumer protections, but a couple of the things that we are particularly proud of [are] … some protections for our returning military. Oklahoma is home to five military bases. We’ve had a number of our citizens deployed and returning and finding it difficult to reinstate their auto insurance as a result of their terminating their coverage when they leave. And when they return, because of that gap, they’re finding it difficult to either reinstate their coverage or having to pay higher premium costs. Also reinstatement of their health insurance. Our bill now compels insurers, both auto insurance coverages or personalized coverages, as well as health insurance coverages to reinstate automatically on return from deployment. So that was an important consumer protection.

Another is a mandatory provision that prohibits insurance agents, independent insurance agents, from co-mingling insurance premium payments with their personal or business accounts prior to transmitting those premium payments to an insurance company. What we want to protect is the integrity of the funds that that are being paid on behalf of consumers that are intended to pay for premiums that should be forwarded immediately to an insurance company. We want to make sure that we’re not allowing insurance agents to utilize those funds, even temporarily, to pay their rent or to use them personally. So those added protections are really important for our consuming public.

Did that co-mingling provision come out of some experience or reports?
Holland: We actually had an incident in Oklahoma, unfortunately, where we had a long time insurance agent who had co-mingled funds and had not forwarded premium payments. It had occurred over quite some time. [The agent] had provided confirmation of coverage to their policyholders, which were false, and then had a major storm hit that area where individuals had completely lost their homes and went to file a claim. And we learned and they learned, that they had no coverage. The investigation from our office ensued immediately and we discovered that there were many, many instances of this, and that it was a real problem. I’m glad to say that our insurers stepped up to the plate and covered the claims of the individuals affected by it but it compelled us to really work with the independent agent association to craft some language that was acceptable and not onerous but would prevent this from occurring again.

Do you feel that you have a good working relationship with the independent agent groups in Oklahoma?
Holland: I actually do. I’m a former insurance agent so I have empathy for our insurance agent population and I’m pleased that we have a really strong professional insurance agent community in Oklahoma. We have very active, high quality insurance trade associations and I feel very strongly about our ability to work with them to ensure that our consumers are well cared for, and at the same time they have an opportunity to develop their business and grow their business and conduct their business as they want to.

Has Oklahoma looked into the brokerage compensation and disclosure concerns that have arisen in some other states?
Holland: That whole issue broke just before I was appointed actually. And one of the first things that I did when I came on board was to call a meeting with our insurance producing community to ask them their opinions–what kind of problems, what are the issues here in Oklahoma, did they believe that there was a problem here, and how they felt about various components of the proposals that were being discussed at that point about disclosure.

We did our own internal investigation. We invited consumers to contact the department if they had any concerns about their relationship with their brokers. Over a period of about three months after I came on board I inquired of our chambers of commerce and other consumer advocacy-type groups or consumer liaisons and I was pleased to say that we had not one complaint come into our department, not one complaint voiced by the chambers of commerce or the Better Business Bureau about agent practices with respect to compensation.

We’ve continued to monitor that, and we continue to communicate with our agents about what our expectations are and I’m pleased with the response that we’re getting and that they hold themselves to a higher standard. I do think overall that as time passes that we are going to have to continue to evaluate the need for more disclosure and transparency and how one is compensated in our environment. And I imagine that we will continue, I know we will continue, to discuss that in Oklahoma and look at ways that we can ensure that our consumers actually know what they are paying for in various components of their insurance programs. And that they understand when they hire an insurance agent it’s a contract for services and they’re entitled to know how much it’s costing them for those services so that they can make a determination as to whether they’re getting their money’s worth or not.

I understand you are interested in climate change issues; what’s going on there?
Holland: One of the interesting factors about Oklahoma is [that] we have some of the highest property insurance costs in the United States. Higher than Florida, higher than California … and that’s because we have chronic wind and hail.

Climate change issues have a big impact on Oklahoma, we’re seeing an increase in the number of storms coming through, the number of tornadoes coming through, but also we’re experiencing right now serious drought conditions. Our drought conditions are pre-dustbowl days, actually, for the severity of the drought.

Oklahoma is an agrarian state, so we still derive a lot of our state revenues from the agricultural industry. Obviously the consequences of drought or flood are dramatic in Oklahoma. … So, yes, we’re beginning the process.

We’ve formulated a new climate change committee here at the NAIC on which I volunteered to serve. And we’re preparing for a climate conference, a weather conference in Oklahoma this fall to provide consumers with a clearer understanding of these changes, what we’re anticipating, how the state deals with those issues, and what they need to be aware of in respect of how those issues can impact insurance rates. And … we will be addressing how they as individuals can mitigate risk within their home. …

You know, nowadays there are new materials for roofs, for instance–in a state where we deal with a great deal of hail damage–there are rubberized roofing materials that are actually hail resistant, and we want to make sure our consumers are aware of their options as well as their responsibility in mitigating risk within their own personal homes.