Long-time Consumer Advocate Sees NAIC Pro-Insurer 'Sea Change'

By Sean P. Carr, Washington Correspondent
A.M. Best Wire Services
December 9, 2009

After 15 years of representing insurance consumers at the National Association of Insurance Commissioners, Birny Birnbaum is stepping away from NAIC business. The association's winter meeting will be Birnbaum's last as an appointed member of the Consumer Liaison Committee.Birnbaum, 56, told BestWire no particular issue or circumstance motivated his departure. However, he expressed great frustration and disappointment at what he sees as insurance commissioners' increasing tilt toward industry interests and industry perspectives.

In recent months, he has strongly criticized the NAIC for studying, but not limiting, the practice of using credit-based insurance scoring in underwriting. "I've noticed a real sea change in terms of the sort of responsiveness to insurer issues and a lack of responsiveness to consumer issues," Birnbaum said. 

Birnbaum served as associate commissioner for policy and research and chief economist at the Texas Department of Insurance from 1993 to 1996. Birnbaum said he spent more than 50 days a year on NAIC business. While he will continue to follow insurance issues as executive director of the Center for Economic Justice, he said it is time to focus on consulting, writing and other advocacy work.

Birnbaum joined other current and former NAIC consumer liaisons this fall to oppose a designated role for the NAIC in proposed health care reform legislation in the U.S. Senate. They said the NAIC does not meet appropriate standards for transparency, open decision-making and independence. An association of elected and appointed regulators, the NAIC relies on funding from the insurance industry to finance its operations (BestWire, Sept. 30, 2009). "The thing that makes me the saddest is the real movement from the NAIC when I was a regulator in the mid-90s -- using the national meetings as a forum for debate, discussion, development of policy decisions -- to where ... you rarely, if ever, see any kind of substantive debate in public," he said.

The structure of the insurance regulation, and the limited nature of NAIC-designated consumer input, makes for an institutional bias in the industry's favor, Birnbaum said. "You've got, literally, thousands of insurance lobbyists, being paid for by policyholder-supplied funds to present and push the industry interest in the states, at the NAIC, in the legislatures," he said. "Here at the NAIC, the entire consumer liaison budget is $120,000, which pays for reimbursement of travel expenses. The consumer reps volunteer their time. That's about the salary of an industry lobbyist for one year. We just don't have the resources to put the full-court press on the regulators.

"The NAIC's consumer liaison program should be scrapped and rebuilt with a smaller -- but better-funded -- group of representatives, Birnbaum said. The panel should be able to have resources to hire experts, lawyers and/or actuaries when needed "to really weigh in on a technical issue" or hire a designated staff member.

"It's very difficult to get organized with such a broad and disparate group, some of whom don't necessarily believe they represent a consumer constituency. They're representing their own interests," he said. (The full audio of an interview with Birny Birnbaum will be available soon at www.bestdayaudio.com.).

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