Insurance and Environment and Government and Economic Development

Web site stirs controversy: Watchdogs pan Insurance Department's pro-business stance

December 26, 2005

Consumer watchdogs are howling over a revamped state Insurance Department Web site that pitches Indiana's "positive regulatory climate" and other business-friendly attributes.

The site's new look debuted a few weeks ago and aims to make companies think about moving to Indiana, Insurance Commissioner Jim Atterholt said.

But critics say a regulator should never play the role of recruiter, and the approach sends the wrong message to consumers seeking help.

"It raises some questions-you know, who's your first master?" said Julia Vaughn, policy director for the advocacy group Common Cause/Indiana.

Bob Hunter, of the Washington, D.C.-based Consumer Federation of America, said he found the Web site "a little shocking."

"Every state tries to attract business, I think, but they don't do it through the regulator," he said. "That's the wrong place.

"If, on one hand, I'm trying to be the pitchman to you, how do I turn around and try to be the disciplinarian?"

Atterholt insists he can wear both hats. In fact, he argues, building trust with the industry can lead to quicker dispute resolution, avoiding costly litigation.

"I don't believe being pro industry and pro consumer are mutually exclusive," he said. "There will be times when they butt heads, but for the most part, having a good relationship with the companies oftentimes benefits consumers."

The Web site, www.state.in.us/idoi/, welcomes visitors by touting the insurance industry's economic impact in Indiana.

Then it gives insurers several reasons why they should move operations here. Those include a friendly premium tax rate of 1.3 percent, "a fair and reasonable civil justice system" and the positive regulatory climate.

For more information, Web surfers can click links to trade associations, including the Insurance Institute of Indiana.

The home page of the old Web site described the department's role, listed new administrative rules and bulletins, and linked visitors directly to complaint indexes.

The new design surprised Joe Belth, a professor emeritus of insurance at Indiana University's Kelley School of Business and editor of The Insurance Forum, an independent periodical.

"I've never seen anything quite like this before," he said.

Belth said state regulators have two main functions-assuring insurance companies remain solvent, and making sure they treat customers fairly.

"I have never heard anybody say in the textbooks that a function of insurance regulation is to lure insurance companies into the state," he said.

The consumer-protection role should be a priority, said Stephen D'Amato, executive director of the Cambridge, Mass.- based Center for Insurance Research, a not-for-profit consumer research and advocacy organization.

He said the Web site's recruiting pitch is "not what you look for in an insurance regulator.

"You want someone to, at a minimum, balance the interest of consumers and insurers, and preferably a department that's going to focus on protecting consumers in a regulated market," he said.

Vaughn called the Insurance Department "the last line of defense for consumers" in Indiana. Consumers are unlikely to seek help from the state, she said, unless they've already failed to resolve their dispute.

Former Indiana Insurance Commissioner Sally McCarty said she'd be discouraged if she were a consumer viewing the new Web site and reading about its pro-business approach.

"I think I would conclude that my complaint is not going to get a fair hearing or a fair review," she said.

McCarty served as commissioner from 1997 to 2004. She said consumer protection was her biggest priority. She thinks the state should leave industry promotion to the industry.

"They certainly have enough dollars of their own to advertise their worth," she said. "I don't think it's the role of the regulators using taxpayer money on a state Web site."

State Rep. Craig Fry, D-Mishawaka, disagrees.

The ranking Democrat on the House Insurance Committee said he has no problem with state government's "speaking to the fact that Indiana is a good place to do business."

The insurance industry, he noted, offers good-paying jobs that don't soil the environment.

Besides, Fry said he respects Atterholt, a former Republican legislator appointed insurance commissioner in February by Republican Gov. Mitch Daniels. Fry said he hasn't heard anyone complain the department is straying from its consumer protection mission.

Atterholt said the Insurance Department added the recruiting pitch to its Web site because it found many companies already checked it for bulletins or regulatory information.

"We may reach some folks who had no idea Indiana was a great place to do business, and that's our goal," Atterholt said.

And he noted the new home page isn't just business-friendly. It displays links to consumer complaint forms more prominently than did the old site. It also has handy links to information about medical malpractice and about the Senior Health Insurance Information Program, a free counseling service for Medicare beneficiaries.

Atterholt does have his limits. He said the department would not become involved in offering incentives to lure businesses here.

It will leave that to another government entity, the Indiana Economic Development Corp., and its director of insurance initiatives, Mike Chrysler.

Atterholt also said economic development will play no role when his department handles consumer complaints. He said the Web site's "positive regulatory environment" pitch means consistency, not bias in favor of the insurer.

"Most of the industry does not want us to be lax," he said. "They want us to be tough on those folks who are giving them a bad name."
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