Arguments For and Against Proposed Constitutional Amendment 4
2012
Arguments For - Ensures Timely Action By Insurance Regulators - Commission's Past Failure To Timely Amend PRC Rules Proved Costly For Some Homeowners:
One need not look any further than recent headlines to know that this proposed amendment is a great idea. In May 2012, it was reported that, in spite of a 2009 change in the law regarding title insurance policy rates, three years later, as of 2012, the PRC's Insurance Division ("Division") has failed to amend its rules to implement the rate changes. Those rate changes were the result of the enactment of a law that provided for a 10 percent to 60 percent reduction in the full policy price for homeowners who refinance their mortgages. Because the Division failed to update its rules to align properly with current law, some New Mexico homeowners have not received the title insurance policy discounts they are entitled to receive. Clearly, PRC commissioners have not exercised adequate oversight of the Division. Creating an independent office for the Superintendent of Insurance will concentrate insurance regulation in one agency and thus ensure timely compliance with state law. - Insurance Regulation Too Complicated And Too Important - Should Be Overseen By Independent and Qualified Insurance Department:
The regulation of insurance, particularly in light of recent changes to health insurance laws resulting from the enactment of sweeping federal health insurance legislation, is an issue of great importance to New Mexicans. In fact, the U.S. Supreme Court's action on the federal Patient Protection and Affordable Care Act increases the complexity and importance of health insurance industry regulation. In addition, many insurance companies offer financial investment services, another complicated area to understand and regulate. Removing the regulation of insurance companies from the PRC and placing it with an agency dedicated to that function would lead to better attention to and regulation of the insurance industry. Insurance also presents one of the most complicated areas related to public policy, requiring expertise in actuarial science, law and the entities, items or services that insurance covers. New Mexico PRC commissioners do not have the expertise necessary to properly oversee the decisions of the Superintendent of Insurance in the regulation of insurance. The amendment wisely proposes to move the regulation of insurance from the PRC to an independent Office of the Superintendent of Insurance, thus, allowing for a concentration of expertise in the Office of the Superintendent of Insurance that will be singularly devoted to the complex business of insurance. Such a setup is similar to that which exists in 35 other states that have standalone departments of insurance. - Insulates Insurance Division From Politics - Current Insurance Division As Part Of PRC Is Too Entangled With Political Pressures And Special Interests:
The National Association of Insurance Commissioners' latest accreditation review of the PRC's Insurance Division placed the Division on probation. The factors cited were the Division's apparent inability to perform credible actuarial analyses and otherwise exercise meaningful oversight of the business of insurance in the state. Though currently the Superintendent of Insurance reports that the Division has taken steps to rectify its oversight capabilities, these steps are too little, too late. A 2012 review by the Center for Integrity gave the Division an "F". Among the factors cited for the failing score was the inability of the Division to extricate itself from political pressures and special interests that arise from its placement within the PRC. Clearly, and historically, the Division is incapable of improving its performance, so to better serve New Mexico's residents, the vital work of regulating the state's insurance industry must be moved to an independent entity able to support quality analysis and oversight. That way, the Superintendent of Insurance can be selected and retained through a politically insulated and independent system while providing accountability not present under the current system. - Expertise Is Needed - PRC's Insurance Division Lacks Necessary Expertise To Deal With Complex Issues:
The Division suffers from at least one of the same shortcomings as does the PRC itself: lack of appropriate expertise to oversee a financially complex and specialized industry. This amendment gives the Legislature the opportunity to establish, by law, much-needed qualifications for the Superintendent of Insurance, ideally, qualifications that are comparable to those that would be expected of a private sector executive tasked with similar duties and responsibilities. In addition, this amendment authorizes the Legislature to establish the qualifications for the members of the proposed Insurance Nominating Committee and the procedure by which the members of that committee will be appointed. A qualified Insurance Nominating Committee will have the appropriate expertise to evaluate the qualifications of candidates for the critically important position of Superintendent of Insurance. - Responsive Insurance Division Is Needed - Proposal Would Reduce PRC Size, Making It More Agile And Responsive To Consumers And Industry:
This proposed amendment would place the oversight of the state's insurance industry in a standalone agency, significantly reducing the size of the PRC bureaucracy by shrinking the PRC's organization by at least one-third, based on the organizational chart depicted in the PRC's 2011 Annual Report. Currently, there are seven divisions (including the Insurance Division) within the PRC, along with multiple subdivisions under the Insurance Division. One hopes that the amendment's proposed independent Office of the Superintendent of Insurance will be more agile and responsive to the needs of New Mexicans as a standalone agency than has been the case with the Division as a part of the larger bureaucracy of the PRC. - Regulating Utilities Is PRC's Core Function - Removing Insurance Division Will Help PRC Maintain Primary Focus:
The PRC, as presently structured, has a wide array of diverse responsibilities, when its core job should be the regulation of utilities, as is the case in most states. Divesting the PRC of duties that are ancillary, at best, to its primary function will allow the PRC to concentrate more effectively on the increasingly complex task of regulating utilities in the state. Additionally, although the PRC's present statutory structure gives the Division some independence, this amendment would remove the ambiguity that exists in present law by creating a constitutionally independent Superintendent of Insurance, and would bring New Mexico in line with the practices of most other states.
Arguments Against - Too Vague - Voters Can't Form Reasoned Opinion Regarding Merits of Insurance Nominating Committee:
This amendment would transfer the Office of the Superintendent of Insurance to an independent agency, with a superintendent selected by an Insurance Nominating Committee whose members would be "appointed and have such qualifications as may be provided by law". This language is far too vague to give voters the adequate information needed to make a reasonable choice regarding the establishment of an Insurance Nominating Committee. The amendment does not specify whether the makeup of the committee would include or exclude elected or appointed officials, public members, PRC commissioners or insurance experts. Without such information, it is unclear what level of political pressure would influence the Insurance Nominating Committee. Voters cannot properly decide the merits of such a committee without knowing the requirements for the committee's membership. - Proposed Change Premature - Insurance Division On Path Of Reform:
This amendment would effectively remove the Division and the business of insurance regulation from the Public Regulation Commission. This step is premature. Although the National Association of Insurance Commissioners ("NAIC"), has placed the Division's accreditation on probationary status, the NAIC will have revisited the Division in July 2012 and a redetermination will have been made in August 2012. The Division is implementing numerous corrective measures to ensure compliance with NAIC standards. The Division should be allowed to continue on its course of improvement. - Accountability To Voters Needed - Moving Insurance Division From Public Scrutiny Precludes Accountability To Voters:
The public must retain its voting power to hold accountable the PRC commissioners who oversee the Insurance Division. Moving the Division further from public scrutiny or voting power to an independent agency will not provide the much-needed oversight of insurance activities that affect New Mexicans on a daily basis. - Fails To Address Hiring Of Unqualified Employees - Proposal Does Not Deal With Issues Of Political Patronage And Cronyism In Hiring Of Unqualified Persons For PRC Positions:
This amendment does not address the problems related to the hiring of unqualified persons to fill Public Regulation Commission agency positions that should require financial and subject-matter expertise. Recent allegations and lawsuits raise concerns about the PRC's hiring practices. The amendment's proposed and unknown Insurance Nominating Committee provides no assurance that staff qualifications and hiring practices would improve. - Consumer Complaints Not Addressed - Proposal Unclear, Fails To Specify How Complaints Against Division Would Be Handled:
This amendment fails to assign ultimate accountability for the newly proposed agency, the Office of the Superintendent of Insurance. If the Superintendent of Insurance is appointed by an Insurance Nominating Committee whose members are also appointed, it is unclear from whom the public may seek recourse. While the amendment provides for the appointment of a Superintendent of Insurance by the Insurance Nominating Committee, it is silent as to whether the committee also has the power to entertain complaints regarding the Superintendent of Insurance or the new agency or to remove a Superintendent of Insurance for cause, like malfeasance. - Too Broad - Qualifications For Members Of Insurance Nominating Committee And Superintendent Of Insurance Are Unknown To The Voter:
With limited details, this vague and broadly worded amendment would allow the Legislature to determine the qualifications and the manner of appointment for the Insurance Nominating Committee and, ultimately, for the Superintendent of Insurance. Since the amendment provides no specifics, the voters are asked to provide broad powers to the Legislature to establish a new scheme for the oversight and regulation of New Mexico's insurance industry, and, therefore, approval of the amendment could result in unforeseen and detrimental consequences.
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