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SEAN FRENCH Watchdog or Lapdog? Trying to Put Some Bite Into the SBI’s Bark BY MARK LEON ONSUMER ADVOCATES call it a dream bill, and insurance industry representatives say it will stifle competition and raise insurance rates. Both sides agree, however, that the omnibus insurance reform bill \(House substantially change the way insurance companies do business in Texas. No issue is more clearly polarizing than the proposal to change actuarial data-gathering procedures. This is data that the State Board of Insurance uses to set insurance premium rates in Texas. Currently the data comes from organizations funded by the insurance industry. The state officially delegates actuarial data collection to these organizations. “It is the archetypal situation of the fox guarding the henhouse,” says Deece Eckstein, a policy advisor to Governor Ann Richards on insurance matters. The reform bill specifically prohibits the state from delegating data collection. If it is enacted into law the state would take over that function. Insurance lobbyists say this will cost the state too much money. Estimates start at $10 million annually. They also insist that the industry wants good, impartial data as much as the public does and that the current system of industry-supplied data works well. “They may give us accurate data,” says Senator Carl Parker, a Democrat from Port Arthur, Chairman of the Senate Subcommittee on Insurance and sponsor of the bill, “it is just the perception of the thing.” Eckstein explains that even if the data is fundamentally accurate, the present system does not allow the board or the public to see it before it is filtered through the industry, “The problem is that insurance companies have industry-owned, industry-controlled, industry-philosophized rating organizations that take the data and make assumptions. We want to filter those assumptions out, get the noise out of the system.” ONSUMER LOBBYISTS claim that these assumptions often amount to data massaging designed to protect company profits against market trends which may never materialize.Whether or not this is actually the case, the perceptual problem remains. Eckstein says that under the provisions of the bill the board would set up a staff to, “take data downloaded into state computer banks Mark Leon is a graduate student in Austin. and develop programs that would allow them to aggregate the data, trend it, do all the things the industry rating organizations currently do. And even if the process is no more impartial it will at least be more open than it is now. This data will be available to everyone, consumer groups, rate payers, policy holders, etc.” Parker counters the charge that it will cost too much money for the state to take over data collection with the following observation: “Two years ago we went to the State Insurance Commission and said ‘we want to gather our own data.’ We had a bill to do it. We asked the commission to give us a fiscal note on it. They came back with a figure of $100 million. We now discover, in the interim, that it costs only $45 million to do it nationally. That, to me, is the bellwether item that indicates that the Insurance Commission has been the lapdog of the industry.” APDOG OR NOT, public confidence in state regulation of the insurance industry is low. Governor Ann Richards gave a powerful voice to this sentiment when she demanded the resignation of the State Board of Insurance. More specifically, her ultimatum was in response to the board’s recent recommendation of a . 23 percent increase in auto insurance premiums which was seen as yet another unjustified, all too easy acquiescence to industry-sponsored rate analysis. Insurance lobbyists say that the industry does not manipulate data presented to the board. Some insist that even if the state compiles its own figures the industry will continue to collect data through organizations like implication here is that a wasted duplication of effort by the state will just add to insurance company overhead thereby driving up rates. Rebecca Lightsey, Counsel to Governor Ann Richards disputes this: “What happens now is that the policy holders pay for data collection because the insurance companies pay for . organizations to collect that data and then pass the cost on. Under the bill the state board will be collecting that information. The bill does not prohibit companies from continuing to collect their own data, but it does prevent them from passing that cost on to the policy holders.” Lightsey says, “The governor is concerned that we fully understand the impact on the industry. She wants to make sure that the data is accessible to both the public and the industry.” Theoretically, once the responsibility for data collection is transferred to the state, any citizen as well as any insurance company will be able to get that data. While these numbers may not mean much to someone who doesn’t read actuarial tables, Lightsey stresses that “they will mean a great deal to the public counsel who represents consumers before the board.” The office of the public counsel is expanded in the bill. Created in 1988, the job of 6 APRIL 5, 1991