The proposed merger of the New York banking and insurance departments, with segments of the consumer protection board, will result in stronger enforcement of insurance companies, according to many parties, although the effect will probably be tempered somewhat as the bill goes through the legislative process.
The budget is due April 1st. As of this report, the legislative option was still in the budget and would be passed us such, unless it is taken out as a separate item. The industry was busy in late March trying to defang it, to some degree.
Some see the combination as being in line with the proactive response to the AIG crisis. Others view it as part of the greater oversight of Wall Street in general, while some see Gov. Andrew Cuomo seeking to keep the luster gained from his days as state Attorney General in play.
Former (2005-2007) New York Insurance Superintendent Howard Mills, now chief advisor to the insurance group at Deloitte, said he was concerned that the regulator would become the criminal investigator as well. “We already have that function. There is no need to duplicate that. It can lead to a hostile environment for the industry,” he said.
“The concern is that one would hope that [the consumer protection board function] wouldn’t become a prosecutorial type of function. Housing a regulator and a prosecutor together could duplicate to some degree what the AG’s office does,” Mills said.
“It seems likely that if the bill passes there will be increased scrutiny of the financial services industry,” said Mark Peters, partner with Edwards Angell Palmer & Dodge in New York speaking to National Underwriter before the budget deadline.
Although one industry veteran said the insurance agents had an uncanny ability to make things happen with their strong lobbying power, others noted that Cuomo is in a strong position and will make the merger happen sooner rather than later.
The biggest portfolio of the insurance department–making sure the companies are financially solvent–”is the day-to-day job of the premier insurance department in the country,” said a source close to the department. Another remarked that the New York State Insurance Department was a model for other departments of
its kind throughout the country. “Why tamper with something that was working?” one former staffer said.