More than a third of the immediate past state insurance commissioners now work in the industry they once regulated, according to a survey in the March Consumer Reports.
The survey, done late last year by Consumer Union, the magazine's non-profit publisher, established the whereabouts of the 50 state insurance commissioners who preceded the current incumbents.
"We found that the former New York commissioner is working for Travelers (Insurance)," Consumer Reports said in the second article in a two-part series on life insurance.
"The former Pennsylvania commissioner is working for Allianz, a European insurance group that has been acquiring U.S. insurance companies," the article continued.
"The former Illinois commissioner is working for Ryan Insurance Group. The former Missouri commissioner is working for Kemper, and the former Ohio commissioner is working for Nationwide.
"In all, CU learned that 19 previous state commissioners found employment in the insurance industry after leaving office. One can hardly be surprised if present state commissioners want to be appreciated by VIPs in the industry they are regulating."
The states won the right to regulate the industry under a federal law, the McCarran-Ferguson Act, passed in 1944. Consumer Reports said that an insurance executive, asked if he would prefer state or federal regulation, replied, "Would you rather be regulated by 50 monkeys or by King Kong?"
The performance of state regulators was faulted in a 1979 report by the General Accounting Office, which is the investigative arm of Congress.
The GAO said that state insurance departments were underfunded, understaffed and they had failed to maintain "an arms-length relationship between the regulators and the regulated."
Six years earlier, the Wall Street Journal reported that the staffs of state insurance departments had doubled between 1945 and 1973, but during the same period, the number of insurance companies had increased fourfold and the amount of insurance tenfold.
The 1979 GAO report, indicating things hadn't changed much, said: "In general, the number of individuals on insurance department staffs with relevant professional training is small, departments spend little to upgrade staff skills, and salary levels are low in relation to the salaries of similar professionals elsewhere." In addition, many regulatory officials, including commissioners, not only exit to the industry, but enter the "revolving door" from it.
President Carter, in a mid-January letter to all of the governors, urged them to give "most careful consideration" to model state regulation proposals by the Federal Trade Commission.
"Americans spend over $30 billion a year on life-insurance premium payments," Carter wrote. "Yet too often, consumers lack the basic cost information they need to find the best policy at the lowest price."
Consumer reports' computations showed that for a 45-year old man buying $100,000 of participating cash-value life insurance, the projected difference over 20 years between the lowest-priced and highest-priced policies would exceed $34,000.