Louis DUBOSE Public Citizen’s Tom Smith taken their toll on the agency’s efficiency. And an increase in authorized personnel, from 838 in 1986 to 1,516 in 1988, has filled the ranks of an agency with a poor history of training and integrating employees into the workforce. This is not to suggest that the agency doesn’t need the new employees only that it is not capable of YET EVEN when the Insurance Cornmission had the facts in hand, they failed to act in the best interest of consumers. By October of 1987, the Commissioner, Deputy Commissioner, and Board Members were aware of NCM’s $16 million insolvency. Yet a request by then Commissioner Doyce Lee to take appropriate action which Lee described as supervision, conservatorship, or liquidation, depending on the numbers was unanimously rejected by the commissioners who decided to allow the company time to work the problem out. Later, the agency’s Deputy Commissioner, R.B Ashworth, continued to hold out for forbearance because, according to the Adams report, he didn’t believe that the SBI had “the adequate staff nor the expertise’ to untangle such a complex mess.” Ashworth was betting on the NCM attorney and later insisted that he continued “to hope and even pray” that the company’s lawyer could resolve the problem. This, according to Adams, appears to have been undue reliance on a “corporate attorney whose primary interest has to be that of his client” and perhaps undue reliance on the Almighty. All of the proceedings were kept secret to avoid a public loss of confidence. By the time the Board placed the company in receivership, in October .of 1988, there was nothing left to salvage. The company was more than $50 million in the red and policy holders had only learned of it when Kay Doughty, the state’s advocate for insurance matters, went public and told of NCM’s financial condition. By mid-January, Lubbock State Senator John Montford, who had also had a private investigator looking at the Insurance Board, began a week of hearings before the Senate State Affairs Committee. Montford’s report, though not nearly as thorough as Adams’s, reached similar conclusions. The Senator fumed about “dangerous mismanagement by the Board and other high-level staff.” A bewildered Edwin “Jack” Smith, Chairman of the three-man insurance commission, was unable to answer many of the Senators’ questions. Smith, who had worked for Clements when the Governor owned SEDCO, an oil-drilling company, was removed as chairman of the agency by the Governor. \(Smith, who spent 28 years as a Clements employee at SEDCO, is described by several lobbyists and lawyers who have worked with him as being honest, accessible, and fair but entirely out of his element at the Commission. Each of the three commissioners earns $63,345 per Montford has filed a package of bills aimed at reforming the agency. And public interest lobbyists Tom Smith of Public Citizen; John Hildreth of the Consumers Union; and Annette LoVoi and Rebecca Lightsey of the Texas Consumers Association have drawn up a list of suggested reforms intended to make the agency more responsive to consumers needs: Their reform agenda includes: Expanding authority, funding, and independence of the Office of Public Insurance Counsel. It was this office, directed by Kay Doughty, that brought the NCM affair to the public attention in October. \(The existence of Doughty’s office_ is, in part, a result of the work of public interest Repeal of the confidentiality requirement that protects companies from public scrutiny. At present, consumers are not informed if their insurer or potential insurer is in financial trouble unless the commissioner determines that release of such information will not harm the company. Require notification when an insurance company is unable to pay its claims within 30 days and compel companies to pay interest on claims not paid within a specified time period. Establish a separate data base by which to fix rates and make policy decisions concerning insurance companies. Currently, government agencies are dependent on information that is provided by companies or trade associations. Expand the Guaranty Fund to cover all insurance written in Texas. Certain companies now are allowed to “opt in and out of the fund’s coverage.” Provide the attorney general’s office with authority to independently pursue corn plaints against insurance conipanies: The attorney general does not act without a request frorri the SBI; Prohibit -for one to two years emplbyees froM leaVing the SBI to work as lobbyists or consultants fdr ” insurance firms dealing with the agency. ‘Atst one Member of the three-member. lea, state insurance board will be replaced during the current legislative session. The Senate NorriinationS. ComMittee will conduct hearings on the appointment .that the Governor is scheduled to make this week and public interest lobbyistS \(“. They were circling like sharks during the Montford hearings, ” one nity to alter the makeup of the board, have sent the Governor a letter requesting that he consider certain Criteria in making his nomination: And. Senators have called for the resignation of the entire board a request that will not seem unwarranted . to anyone who has read the carefully documented bill of particulars in the Adams Report. And it might not be a bad policy decision to conduct a healthy Stalinist purge of the upper management of the agency, where the commissioner’s minions can never seem to coordinate and implement even the most well-defined policy. One toplevel manager inquiring about his authority and what was expected of him was told: “you . have to pull the wagon, load on as much as you can pull.” That’s not exactly how it’s taught at the Wharton School of Business. What really is necessary here is the identification of a Constituency broader than the regulated industry. And the introduction of a new ethic that recognizes as a fundamental principle the protection of consumer interests. For that to happen, heads are going to have to roll. L.D. 4 FEBRUARY 10, 1989 / Ai.:ll ‘ Irr
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