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INTERVIEW Insurance: New Cop JPROBERT HUNTER sees no conflict between his 13 years as a national advocate for insurance consumers and his new job as the state’s Ihsurance Commissioner. Hunter, 56, took the oath of office on November 3 with a determination to make the free market work for insurance consumers for a change. Before his nomination by Governor Ann Richards, Hunter, a Republican, served as a consultant to consumer groups and government agencies on public policy and technical matters dealing with insurance. He also was the founder and president of the National Insurance Consumers Organization a pro bono basis. After working as an underwriter and actuary for insurance companies and trade groups, he became an administrator of the Federal Insurance Administration, the agency in charge of federal flood, riot and crime insurance, during the 1970s before he formed NICO in 1980 with the help of Ralph Nader. Of course Hunter gets high marks from consumer advocates, for whom he has testified in Texas rate cases. While some Texas insurance executives have expressed reservations about Hunter, who rankles them, among other things, with references to the insurance industry as a cartel, Robert E. Vagley, president of the American Insurance Association, told the Austin AmericanStatesman he always found Hunter to be open and receptive to reasoned argument. “I have no doubt Bob will bring a high sense of responsibility and integrity to that office,” Vagley said. In remarks to the staff after his swearingin, Hunter said the Department of Insurance has, by design, largely been irrelevant to the insurance ‘market. In the past two years, he said, the Insurance Board under Governor Richards has charted a new, pro-consumer course, but policies that favor fair rates in competitive markets have fallen short, as neither the board nor the commissioner had the authority to carry out a coherent program of insurance reform. Legislation adopted this past year consolidated the authority under the Commissioner and despite other “major deficiencies” in the bill, he said, “I would not have accepted the Governor’s offer had I not believed the statute created the opportunity for Texas to make history in the protection of consumers.” Each year insurance companies collect about $35 billion in premiums in Texas and they pay only about $25 billion in claims, he noted. “You can expect the Department of Insurance to make a real contribution to the competitiveness of the market,” he said, “first by giving consumers the information necessary to make informed decisions, second by cracking down on arbitrary and discriminatory practices, and third by fighting the ingrained institutions of cartel pricing exploited by the industry to fix prices.” Hunter takes over an agency with slightly more than 1,000 employees, up from the one to four employees he had at NICO. He said he would work to get rid of unnecessary …you’ve got to enforce the anti-trust statutes against the insurance companies if there’s any kind of collusive behavior. but labor-intensive functions, such as calculating the discount that insurers may give off workers compensation rates, even after the basic rates have been deregulated. He plans to enhance the department’s efforts to inform consumers of ways to save on insurance costs. James Cullen of The Texas Observer, interviewed Hunter in his office on the 12th floor of the William P. Hobby State Office Building in Austin. Following are excerpts from that interview, with questions in italics: Car and home insurance rates allow insurance companies to deviate up to 30 percent from the rates that the board has set and in fact several of the larger companies are at or near the top of the “flex band.” The system seems to depend on competition. What makes a competitive market and does Texas have a competitive market? “It probably depends on where in Texas you look at, how competitive the market is. One of the things I’m going to be working on is a definition of what is a competitive market. I don’t think we have a clear one in terms of market structure, in terms of performance and in terms.of conduct. If there is redlining in an area, for example [usually low-income neighborhoods where companies are reluctant to write insurance], there’s not a competitive market there, and there has to be some regulatory interference. In other areas of the state, there may be very active competition. We need to do the detailed research to find out how the market works and once we do that then we’ll possibly have to take certain regulatory steps in certain parts of the state but not in others. Part of my job is to make the conditions for competition real. I believe competition will work to hold down rates, if the market is competitive. … “We need, in my view, the best consumer information in the country and I’m going to work toward that goal. If you rely on competition you have to have an informed consumer. It’s a sine qua non of competition. You cannot do it without, so you’ve got to inform consumers and you’ve got to make sure any cartel vestiges are eliminated and you’ve got to enforce the anti-trust statutes against the insurance companies if there’s any kind of collusive behavior. All these things have to be in place. You’ve got to make sure there are no barriers to entry … other than reasonable barriers on capitalization and you’ve got to make sure that if insurance sales are being done in a way that’s anti-competitive through misleading ads, then that has to be eliminated. We have to enforce much more vigorously our compliance laws to nail companies that try to mislead consumers, and so on. So competition can work, but only if you have all the impediments to competition removed. … “I think some of the stuff we put out is pretty good, but we can make it better. I’d like to suggest, since we have pretty good price information on auto insurance, that the price information be made available through an 800 number. I would suggest to whoever sends out auto license renewal notices that there would be a printed information packet saying, ‘Here is the 800 number; when you’re shopping for auto insurance the state has good information for you.’ A lot of drivers don’t even know we have it.” In what other ways do you envision reaching out to consumers? 6 NOVEMBER 26, 1993