In Government Goes After Kentucky Mines For Fines - a National Public Radio (NPR) story on the recent rash of U.S. mining accidents, cave-ins, and deaths, Wes Addington of the Appalachian Citizen's Law Center was quoted as saying, "Part of the problem is that many of the higher-ups in the Federal Mine Safety and Health Administration (MSHA) come from the coal industry, and they fully expect to go back to the coal industry." 

Strom

The implication is obvious: When an official with a vested interest in the industry in which he serves is placed for a time in a position where he can heavily influence the management end of that industry, fully expecting to return again to a high position in that industry, he is more than likely going to feather his own nest while in that position of authority.

The fallout from this "revolving door policy" in the mining industry is similar to that which faces consumers and collision repairers when insurance commissioners (ICs) are appointed or elected into that powerful position from the pool of insurer personnel, and fully expect to return to an insurance position of note when they complete their term as IC. The rights and safety of consumers to be made whole again is not likely to be the main concern when commissioners who come from within the insurance industry regulate the only existing office of protection for consumers - from insurer interests.

In his column, The Story Of Insurance Regulation: Regulation Of, By And For The Insurance Companies, former Penn-sylvania Insurance Commissioner Herb Denenberg wrote, "Don't think the insurance commissioner regulates the insurance industry. It's the other way around. The typical insurance commissioner over the years has been somewhere between a lapdog and puppet of the industry. That means consumers often pay too much for insurance, get the wrong kind of protection, don't get their claims paid properly, and are otherwise ripped off by an industry that pretty much operates without the restraints that a commissioner is supposed to apply."

Pennsylvania is one state in which the IC is appointed by the governor and, generally speaking, governor-appointed ICs are chosen from the insurance industry. Whether there is any more accountability in states where the IC voted into position by the general public comes from the insurance industry, remains questionable.

Denenberg advances his point, that politicians and the insurance industry claim there is no need for further oversight of the office of IC, while these see to it "…that the insurance commissioner is appointed with their approval, and is little more than their errand boy. The commissioner supplies the appearance of consumer protection, but pretty much delivers insurance industry protection."

Though those who study insurance regulation have for years viewed this as an obvious conflict of interest, and though Congressional hearings and endless studies have probed the problem, still, nothing has been done to resolve it.

Revolving door policy

Denenberg continues, in part, "Money dictates policy. Campaign contributions gain access and input into the decision making process and also legislative and executive outcomes. The consumer is left out in the cold… The ruling philosophy is less regulation, less government interference, and more getting government off the back of business. Translated, that means the insurance industry (and other industries) do pretty much what they want to do."

And what insurers want to do is to promote what is commonly referred to as a revolving door policy for insurance personnel - that door being the revolving door to an insurance commissioner's office. In this scenario, the commissioner enters the office of IC, having worked within the insurance industry. After his tenure as IC is expired, in which he typically has made better contacts within the insurance industry and polished his resume, he negotiates a top job again within the insurance industry, resigns or is voted out as IC, and is reemployed within the same insurance industry he temporarily left.

The insurance industry will then do its best to have his vacated position filled by another from within insurer ranks. Unfortunately for consumers, that's the way it too often works. According to Denenberg, "A revolving door system (in the office of commissioner of insurance) is a built-in conflict of interest: a built-in bias against protecting policyholders, and a built-in regulatory abuse."

Promises of revolving door insurer re- employment assure that crucial regulatory decisions made by commissioners are made with insurer interests in mind. It's not hard to see from the above scenario that one of the last things on the typical insurance commissioner's mind is protecting the policyholder and public. The first thing on his mind is protecting his past and future benefactors - the insurance industry in general, and his past and future employers in particular.

In exiting his post as IC through the revolving door, the commissioner returning to the insurance industry might, while still serving as IC, first seek guidance from the state ethics commission, which might rule along the lines that he is free, while still holding the position of commissioner, to discuss positions in the private sector so long as he excuses himself from decisions on matters related to any organization with which he might interview for a post- commissioner job in the insurance industry.

The conflict of interest here is that even if the IC excuses himself from matters related to his future employers, those questions will most likely then be resolved by his key deputies, which most likely were appointed by the commissioner himself, and, understandably, may not be comfortable ruling against their present employer (though varying from state to state, it isn't uncommon for exiting ICs to recommend one of their deputies for possible appointment as the successor commissioner).

This assures that deputies to the IC would most likely not want to rock the commissioner's boat. And, since it is not improbable that a deputy knows how his commissioner thinks on any given matter, the deputy will likely follow the lead of the commissioner and yield to his will.