Making The Case

Now that the dust, or perhaps more aptly, the water line, is beginning to settle in the aftermath of Hurricanes Katrina and Rita, the question that floats to the surface is “Feds or states?”

It is a question the insurance community has been tackling for years now and its drumbeat resounds at quarterly meetings of the National Association of Insurance Commissioners. Much of the activity at the NAIC is focused on proving that state regulation is both effective and relevant.

Indeed, that drumbeat and accompanying dance would no doubt have been heard in New Orleans if Katrina’s roar hadn’t wiped away the NAIC’s fall meeting scheduled for the following week in Crescent City along with everything else in its path.

Part of that drumbeat has been a repeated call for state regulators to focus on their strengths and avoid a regulatory race to the bottom. How? Well, through action; no, make that quick action, on everything from market conduct reform to speed-to-market initiatives.

It is only through strength and through leadership that a case for state regulation will be made, regulators are told.

Well, the case was made and then some with the response of individual state insurance departments and the NAIC in the days after the storm.

Team Katrina–embodied in the commissioners and staffs of the Louisiana, Mississippi, Alabama, Georgia, Florida and Texas insurance departments–went into action, initiating everything from a summit to work with insurers on assessing damage and paying life and property-casualty claims to setting up help tables at shelters to facilitate contact with refugees’ insurers.

Advice from both New York and Florida, which respectively experienced 9/11 and a wallop from 4 hurricanes in one season, provided valuable insight from institutional memory. New York, in turn, had received advice from lessons learned by the Oklahoma department after the Oklahoma terrorist bombing. That institutional memory proved a kind of lifeline as well as timeline regulators could use.

The NAIC, for its part, created an emergency responder database of state resources. That complemented state resources on individual state insurance department Web sites.

The actions were quick, nimble and, from the sense I got from people I interviewed after the calamity, straight from the heart.

And, insurance departments may well be fielding questions for a while.

As Rep. Shirley Bowler, a legislator from Harahan, La., and New Orleans resident, cautions, “We’ll be a long time recovering from this.” The assessment was a firsthand account of the devastation she witnessed.

But the second piece to Bowler’s account was a message of hope: life was starting to stir again. Schools were priming to reopen and some supermarkets already had opened their doors for business.

State insurance advocates also have reason for hope. With the response to Katrina, they proved themselves well up to the task of taking care of the business of regulating insurance.

It is perhaps one of the stronger arguments they can and should point to when asked the question, “Feds or states?” It is a drum they should beat.

Given the response of both federal and state governments to the catastrophe, it would be interesting to see how insurance consumers would answer the question if they were put in the soggy shoes of Katrina-impacted residents.

Jim Connolly

Senior Editor