Q&A: Michael Consedine, NAIC
Former Pennsylvania Insurance Commissioner Michael Consedine took over as CEO of the National Association of Insurance Commissioners in early 2017 and immediately turned his attention toward helping his former commissioner counterparts manage critical issues such as the uncertainty surrounding President Barack Obama’s signature health care law. He is also overseeing the organization as it moves toward adoption on a cyber security model law and engages with federal officials on issues such as reauthorization of the National Flood Insurance Program and the covered agreement between the United States and the European Union. He discussed those issues with Business Insurance Deputy Editor Gloria Gonzalez on the sidelines of the NAIC’s summer meeting in Philadelphia on Saturday.
Q: What are the priorities for this NAIC meeting?
A: My priorities are my members’ priorities. Obviously, health care is a huge issue in many of our states. Our cyber security model will be up for discussion. That has come a long way through multiple evolutions and I think is in a really good place right now. We’ve had some recent breaches even as late as this week at insurance companies, which I think illustrates the need to have these kinds of mechanisms in place to ensure that companies are putting in appropriate security measures and then taking appropriate action when there are breaches and that state regulators have to be involved in that process. The model has evolved. It mirrors in many respects the New York regulation, which I think is a great result and allows for some consistency and uniformity in approach, which I know is a big issue for the marketplace. And we have the benefit of having already gone through the process in New York and learning from their experience.
Q: How do you achieve consensus on a cyber security model law?
A: It’s a challenge, and this body is very consensus-driven. I don’t think any one of our members doubts this is a major issue that states need to address. And if we don’t, the risks are you have individual states that will take their own specific actions and therefore create this mismatch and possible patchwork of regulations, which is not in the market’s interest or consumers’ interest, or you have the federal government stepping into the space, and obviously we have concerns about that.
Q: What are your thoughts on how the NFIP reauthorization is going, especially given the fact that there is a pending expiration of the program?
A: With health insurance demanding a lot of congressional attention, that’s unfortunately sort of been pushed to the side, and we think it needs to come back to center stage. We’ve gone through (reauthorization and pending expiration) before and seen the damage it does to consumers and marketplaces. We have been a vocal advocate for reauthorization and for also expanding the ability of the private sector to offer flood products and the ability of insurance regulators at the state level to be involved in the regulation of that. We know the markets. We know the products. We know how insurance works, and we think we can be a good partner in the expansion of flood insurance into more of a private-sector alternative. Nothing is going to replace the current federal program, but you can certainly supplement it, make it more competitive, potentially introduce better consumer services in some areas. We think this is one where there is at least bipartisan recognition for the need for reauthorization. There may be some differences of opinions on some of the nuances, but clearly, it’s something that needs to be done. The clock is ticking, and we think the market would be best served by a long-term reauthorization, but we’re quickly going to get to the point where we just need something to happen to keep the program alive.
Q: During NFIP hearings on the Hill, there’s often been concerns about private insurers “cherry picking” the best risks. How can NAIC address that concern?
A: We are there to create a fair and level playing field. There will be some amount of targeted engagement by private-sector companies, but that may not be a bad thing to the extent that they’re introducing enhancements to the technology to allow for better underwriting (and) rating. A rising tide lifts all boats, and the entire marketplace would benefit from that kind of innovation. We have not seen a lot of that. We can encourage that, monitor it and ensure consumers are being well served by the private-sector alternatives that might emerge.
Q: Now that there’s been a decision to move forward on the U.S.-EU covered agreement, what would you like to see in the implementation to address NAIC’s concerns?
A: We are all awaiting the final agreement and, more importantly, this policy statement that is going to accompany it. We’re thankful for the outreach from the current Treasury administration designed to address some of the concerns of state regulators about the ambiguities of the current agreement. We understand that this policy statement will not only address that, but will also emphasize the primacy of state regulation and the leadership of the states and the recognition of our development of our group capital calculation tool as something that meets the terms of this agreement. We remain cautiously optimistic that we can end up in a good place under this covered agreement. That’s not to say we embrace the mechanism of a covered agreement. Frankly, I hope this is the last covered agreement we’ll ever have to deal with.
Once we have it in hand, then we’ll begin the process of figuring out how best to move forward with any implementation. That’s something that the membership will drive the decision-making around, but to me you can go a very surgical route and just try to do a bare-bones implementation that addresses the specifics of this agreement with regard to the EU or you could take a broader approach and implement it in a way that addresses it for similarly situated jurisdictions and negate the need for future covered agreements for those countries: Bermuda, Switzerland, Japan and potentially even the U.K. down the road. We’ll start to have that discussion once we have the final agreement. And we’ll have time. The agreement itself calls for about a five-year implementation timeline. We will need all of those five years, and we’ll have to work very closely with our state legislator colleagues in getting changes to our current model made if we go that direction. It’s going to be a pretty significant effort, which made the engagement of Treasury in addressing our concerns all the more important and we appreciate where they ended up.