A Good Win in North Carolina for Experience

New Chief Plans a Blog, Statewide Agent Meetings and a Solution for Coastal Property Owners and Insurers

On Nov. 4, Democrat Wayne Goodwin won election as North Carolina Insurance Commissioner with 52 percent of the vote, succeeding 24-year veteran Jim Long. Goodwin campaigned on his experience. He is a former four-term member of the North Carolina House of Representatives. Since early 2005, he has been assistant insurance commissioner and has already performed some of the duties of the office.

He and his opponent ran publicly finances campaigns and he refused to accept any contributions from special interests during his campaign.

The North Carolina Insurance Department currently has a budget of about $75 million and regulates 1,400 insurance companies and 145,000 insurance agents.

The insurance commissioner also serves as the state fire marshal and oversees numerous other industries and activities, including bail bondsmen, auto clubs, the state building code and injury prevention programs.

In this interview with Insurance Journal‘s Andrew Simpson, Goodwin talks about his victory and the issues he will focus on as he takes over the department.

Based on your election experience, what was it about your candidacy that made the difference, that drove you to victory?
Goodwin: I think the most vital issue that made the difference in my victory was I was the only candidate with relevant experience. There were three candidates on the ballot for insurance commissioner here in North Carolina, and I was the only one with relevant experience. Certainly having served as assistant insurance commissioner was something that none of the other candidates had as experience.

The commissioner you are succeeding, Jim Long, has been in office for more than 20 years. How would you compare your approach to insurance regulation to Long’s, or how much will your approach differ from his?
Goodwin: He and I agree in that there is a dual goal, a dual obligation of an insurance commissioner. One is affordable and accessible insurance for our consumers and our businesses, and at the same time, a competitive insurance market that provides for solvent companies to be welcomed to do business here in the state. Some people say that those are polar opposites, but Commissioner Long and I agree that you can strike a balance to where both consumers and businesses and the insurance market are able to be mutually satisfied.

We perhaps have slightly different management styles, but I’ve enjoyed being able to work with him for a number of years and I’ve learned first-hand what an insurance commissioner faces across the spectrum of issues that are within our jurisdiction.

I guess I’m more involved on new technology, so that’s something which I’ll be focusing on even more, relying even more on constantly updated Web sites for the department, initiating a blog to help both the public and those who we regulate stay up to speed on issues.

Even just today, we’ve been planning a regular series of regional town meetings across the state, focused on the concerns of agents. Insurance agents are on the front lines, and they hear from their neighbors, their customers, as to what concerns there are, what’s affordable, what’s not, what products are needed. What products are popular or unpopular. I have started establishing an agents advisory council with a focus on regional town meetings. I look forward to ramping that up.

The AIG situation obviously has focused attention on insurance regulation. How you see your state being affected by the AIG crisis? Also what lessons about state versus federal regulation do you think might be drawn from it.
Goodwin: I’ll answer the last part first in that it appears that so far that part of AIG which is the insurance component has been on stronger footing than the other component. That is due in great part to state regulation and various regulatory requirements that established caps on the amount of investments that the insurance industry can have and having guarantee associations and so on.

When the AIG matter exploded onto the scene, one of the responsibilities that this office had — and I personally had it as well — was responding to the public about how did this affect insurance and while still agreeing there is an interconnection between securities and investments and insurance, pointing out that the insurance side has been on stronger footing.

That’s why I am a strong proponent of state regulation as opposed to federal regulation. I believe that the states are best able to address the concerns of the respective states; each state has its own dynamic, and recent experience — when I say recent, in the last couple of decades — most people, myself included, do not have confidence in Washington being able to successfully regulate insurance at this time.

How will the economic downturn affect state government and your department?
Goodwin: The North Carolina Department of Insurance is funded by the industry. The process of this is that the Legislature appropriates the funds and then the department — through the monies it receives in escrow from premium tax and so on — reimburses the state with interest.

The industry funds us, so obviously I am still examining the situation. I’m not finished with yet — it’s still early — but I do have some trepidation in seeing problems on both ends of the scale. Tough economic times affect the insurance industry, which may affect the gross premium taxes that keep the Department of Insurance going.

On the other end, the General Assembly and the state itself is having a fiscal crisis and it will have difficulty with any necessary funds. So it will be a delicate balancing act.

Regardless of what happens, the point that needs to be made is this: that if there is ever a time to have an efficient — in fact I would say a more efficient Department of Insurance and a targeted regulatory role — it would be now, during these difficult economic times. Because during tough times, there is an increase in insurance fraud and we have to protect the public and the industry from that. During these tough economic times, the cost of medical care and other things are affected. This is the time when we shouldn’t allow cuts in the department because the need is even greater.

Property and casualty insurers have raised concerns about the Beach Plan. They’re concerned it may be under-funded and they worry about big assessments should a major storm hit. Are you concerned and what role do you play as commissioner in addressing this issue?
Goodwin: I have described our Beach Plan or coastal insurance crisis as a ticking time bomb and I believe that is a fair statement, because even persons who are on the Beach Plan board of directors and others have seen the dire circumstances that we’re in. I do agree that the Beach Plan is under-funded; I think and expect there to be a set of solutions. There is no one single silver bullet on this, but I do expect a set of solutions to come forward from the current legislative study committee that’s meeting on this problem, as well as proposals that will likely be considered by all involved over the coming months.

Frankly, now is the time to act in two respects. One is that we haven’t been hit by a dramatic storm, a high level hurricane, in a number of years and we know it will happen at some point. We need to build up those reserves now while we can. And equally important, we need to take steps to fix the problem now while the Legislature’s focused on it. Having served in the Legislature, I know it’s sometimes hard to get the attention of lawmakers because they’ve got so many other things to focus on and to remedy and to lead on. While they are engaged in helping us work together on solving it, we need to it. So it’s a window that we can’t allow to close.

Beyond your state’s Beach Plan, do you support a regional or a national catastrophe plan? Or do you think North Carolina can handle its coastal issues?
Goodwin: My default is that we should try to solve it on our own here in North Carolina. But as I shared on the trail leading up to the election, I am open to considering a regional pool, but only if there’s certain stipulations met. I’m not a fan of a national pool because it would most likely lead to increased rates for North Carolina. At the same time, I want to gather all the data and see if I’m correct on that. But my default is, and my plan is, let’s see what North Carolina can do to solve its own concerns. And if we have to consider anything beyond that, look at a regional pool of joining with one or two similarly situated states. But, again, it’s still premature on that.

What responsibility do you have for the state’s building codes?
Goodwin: We have some responsibility. The Building Code Council promulgates the building code, but the commissioner of insurance and the department provide the staff. We provide the engineering expertise. So in terms of interpreting the building code and making recommendations regarding the building code, that’s what the insurance commissioner and his staff do. But the Building Code Council itself is the body that actually promulgates that. It’s appointed solely by the governor, by the way.

Do you see the building code as another tool to help resolve some coastal issues?
Goodwin: I do. In fact, I think that’s a very strong component of helping to address the coastal insurance crisis. It’s not just a matter of reserves and appropriate rate, it’s also about making our structures, our buildings, our homes, more wind resistant and more damage resistant. Because the more resistant they are to these incredible storms, the better insurance rates there will be, but also the lower the risk there will be for carriers to cover such structures. As I mentioned, there’s a joint select committee on this issue, and several of the presentation, even as recently as yesterday, have been on the building code side of the equation.

… North Carolina has a number of exceptions in its building code. In other words, we do not duplicate the international code that’s used by other states. We have a number of exceptions… There are some exceptions that I think that are needed because we’re still a rural state in many respects. But there are some which have been discussed, such as residential sprinklers, types of wind-borne debris protections and such, that I think are going to come under close scrutiny by lawmakers.

You had mentioned that given the economic downturn it’s important to keep an eye on insurance fraud. Do you have a dedicated unit for that or any specific plans to address?
Goodwin: We do have a dedicated unit. We have 21 employees in the department that work the investigations division. … What I’ve learned is that when the economy has a downturn, sadly you see an increase in fraud… The division has seen a 200 percent increase in incoming referrals in the last biennium and we’ve also experienced a 43 percent increase in arrests and convictions.

We need appropriate staffing to address the case volume in order to respond to other law enforcement who count us as partners in this. So our department is requesting an increase in its budget to help us fund necessary staffing and travel that we need to fight fraud.

Most of your colleagues are appointed commissioners. As such you face additional and perhaps different pressures to keep your job and to do things than they might face. How you remove the influence or the perception of the influence of special interests — including the insurance industry and their money — and assure all the stakeholders involved that you will be an independent regulator?
Goodwin: First of all, you’re exactly right, in that elected insurance commissioners do face additional pressures and in some instances different pressures than appointed commissioners.

It also appears that – just through my study of this — that elected commissioners tend to serve longer as well, and that has an impact on regulation, too, in terms of institutional memory and stability and the regulatory role.

But I will say this, the best example that I can give of how to address your question is this. I was the first person who voluntarily declared my intention to be a publicly financed candidate for insurance commissioner. The General Assembly in North Carolina passed a pilot program in 2007 that provided for a voluntary public financing of elections for certain state-wide offices. There were three they chose for this pilot program. One was insurance commissioner, the other one was superintendent of public instruction, the third one was state auditor… I think the most direct way to address anyone’s perception of the role of the insurance industry or any other interests in the insurance commissioner’s race in North Carolina was by voluntarily participating in the program…

The monies that I raised — as did my Republican opponent who also agreed after I did to participate— could only come from registered North Carolina voters, could not be out of state individuals; it could not be PACs, it could not be any special interest of any sort.

I qualified, and then as a result of that — as did my opponent — we both received a public grant to cover the rest of the campaign through November 4th. In fact a study just came out about this a few days ago: in 2004 the percentage the percentage of campaign funds that the candidates for insurance commissioner raised from entities regulated by the department was approximately 66 percent. The percentage dropped in 2008 to 5 percent. That has received kudos and plaudits from editorial writers and from ranking filed voters in recent weeks.

So do you think the system worked?
Goodwin: I believe it did. I mean, there are some changes I think that are necessary for this pilot program if the Legislature agrees to extend it, but I believe it worked. It is not just about the appearance of a conflict, it is also about meeting with voters and that’s what this pilot program forced participants to do….

In four years — and I know you haven’t even had your first week in yet — what would you hope to be able to tell the voters about why they should re-elect you?
Goodwin: Well, what I hope to accomplish is a solution to coastal insurance crisis; a modifying of the rate-making process so that it’s even more efficient; a commissioner that is more involved around the state on matters that pertain to the department, using technology to reach and interact with more of the public and more of the insurance industry about what work we’re doing together; and just looking at the overall number of how we’ve been able to strike that balance between affordable, accessible insurance and a competitive marketplace.

In other words, I want to look at how many companies are underwriting here in the state and are making a reasonable profit while at the same time we’ve been able to keep insurance rates at an affordable level so that consumers and families and businesses will that they can continue to get the coverage they need.

Topics Fraud Agencies Legislation North Carolina Market AIG