The Insurance Lobby—The Persistently Powerful Foe

A funny thing happened yesterday at the California Association of Public Insurance Adjusters (CAPIA) legislative meeting. Just before Amy Bach and yours truly were about to give our presentation about California property insurance legislation, we noted that Allison Adey of the Personal Insurance Federation of California (PIFC) was in the audience. I promised she would make the blog today because I have never had an insurance industry lobbyist show up to learn from me and others at a public adjuster event.

To her credit, she withstood my jabs with a remarkably good attitude. The PIFC website lists her background as follows:

Allison Adey serves as a Legislative Advocate for the Personal Insurance Federation of California.  She represents PIFC’s member companies before the California State Legislature and California State government agencies and departments on personal lines property-casualty insurance including auto, home, flood, and earthquake insurance sold to individuals.

Prior to joining PIFC, Allison was the Legislative Director for Senator Henry Stern where she staffed him on the Budget and Judiciary Committees and advised him on policy issues related to privacy, health, public safety, and labor.  She managed the Senator’s legislative portfolio and budget priorities through three years, including during the unpredictable Covid-19 crisis.

Allison attended the University of California Hastings, College of Law to obtain her Juris Doctor, with a focus on Public Policy and International Law. During her final year at UC Hastings she served as the Editor-in-Chief for the Hastings International and Comparative Law Review. Her final term in law school was spent working for the Assembly Judiciary Committee writing committee analyses and advising committee members on the bills before them. She obtained her Bachelor’s Degree in History from the University of California Santa Cruz.

The insurance industry uses policyholder premiums to pay for talented lobbyists like Allison Adey. Many lobbyists previously worked as insurance regulators. Adey’s boss, Rex Frazier, served as a Deputy Insurance Commissioner in California.

The issue of insurance regulators transitioning to roles within the insurance industry was noted in The Revolving Door Connecting Insurance Regulators with the Supposedly Regulated Insurance Industry. The “revolving door” raises significant concerns about potential conflicts of interest and the effectiveness of regulatory oversight of the insurance industry. This practice involves regulators, who are responsible for overseeing the insurance industry and protecting consumers, leaving their public service roles for lucrative positions within the industry they once regulated. This can undermine consumer protection and enforcement of laws, as insurance regulators may avoid taking actions that could upset potential future employers or may make decisions that benefit them in their future industry roles.

A classic recent example of the “revolving door” is Florida’s former Insurance Commissioner, David Altmaier’s, move to a lobbying firm. I literally questioned whether Altmaier would join a lobbying firm after his resignation in “Ding Dong the Wicked Insurance Witch Is Dead! Florida’s Insurance Commissioner Resigns!” As sure as the sun rising in the east every morning, Altmaier joined Florida’s largest lobbying firm to advocate for insurance companies, leveraging his network of contacts and knowledge gained from his time as a regulator. This move highlights the potential for conflicts of interest, as Altmaier’s new role allows him to use his insider knowledge and connections to benefit the insurance industry, possibly at the expense of consumers.

The “revolving door” is not new. Studies and reports have documented the rapid turnover among regulators and the movement of commissioners to industry jobs, suggesting that this practice has been a concern for decades. The involvement of former regulators in the industry, whether directly working for insurance companies or lobbying on their behalf, creates an atmosphere that may not be conducive to stringent regulatory enforcement.

Fifteen years ago, in Moving From Insurance Regulator of State Farm to State Farm’s Counsel, I noted this “revolving door” issue in Mississippi and that Ralph Nader complained about it as a national problem regarding insurance regulation:

I met Ralph Nader in San Diego about a decade ago. He remarked that a major problem with Departments of Insurance is that most have a revolving door to and from the insurance companies they supposedly regulate. Nader implied that unless laws prevent insurance companies, their vendors and law firms from hiring those who supposedly regulate their activities, actual regulation that supports consumers will not exist. The practice of insurers hiring former employees of Departments of Insurance must stop in order to accomplish honest regulation without an appearance of a conflict of interest.

The bottom line is that the insurance industry has an army of lobbyists and lawyers and a mountain of money for political contributions. These lobbyists are well paid, experienced, and very competent at propaganda and persuasion, supporting their clients’ interests. Thank goodness California policyholders have United Policyholders and my co-presenter, Amy Bach, advocating for them.

The PIFC has a wildfire priority, which I think is a possible win-win for policyholders and insurers. The PIFC supports fire hardening and codes to prevent and mitigate wildfire loss. It supports efforts to stabilize the insurance marketplace so that fewer policyholders end up with the FAIR plan and are insured by private insurance companies. Every state in the union except California accepts forecast modeling, and it may be time for California to allow some form of forecast model to determine rates so that private property carriers can fully pay wildfire claims without going broke.

Thought For The Day 

The crisis shows major flaws in the way the US financial system is regulated and, more importantly, in our political system, which is essentially a bazaar of legalized bribery where financial institutions can buy themselves the governmental regulations they want, along with the regulators who routinely receive lucrative jobs in the industry whose oversight had formerly been their responsibility, the so-called revolving-door practice.

—Thomas Pogge