Out of the Storm News
Regular attendees of the National Association of Insurance Commissioners’ thrice-yearly meetings are known to joke that NAIC actually stands for “No Action Is Contemplated.”
At the group’s latest meeting in Phoenix, the Sharing Economy Working Group rendered the basis of that humor a little less true.
California Insurance Commissioner Dave Jones, chairman of the working group, oversaw the development, vetting and adoption of a white paper to assist both regulators and legislators as they approach insurance issues related to ride sharing. R Street was pleased to be an early participant in the white paper’s development and to contribute suggestions that were adopted into the paper.
The final and ultimately adopted draft of the white paper was presented to the working group with a supplemental handout that reflected a public policy compromise between insurers and transportation network companies. That compromise, publicly disclosed first by R Street, was presented to the working group by Jeff Sauls, vice president of state legislative affairs for Farmers Insurance and Gus Fuldner of Uber.
Together, they characterized the deal as a victory not only for the burgeoning new ride share industry, but also as a sensible balance of insurance standards.
They’re right. But what’s more, instead of crafting a deal designed to preclude certain market actors, the compromise is fundamentally accommodating to competition and further development of both the TNC industry and innovative new hybrid insurance products.
For his part, Commissioner Jones was vocal in his praise for the deal saying: “Congrats, this is a tremendously positive development.”
Now that a deal has been struck, it is necessary to effectuate it on a state-by-state basis. In some states, that might be easier said than done. Some states have short legislative sessions that are already coming to a close. Other states have already adopted their own TNC legislation and, given how acrimonious the early encounters between insurers and TNCs were, legislators in those states may be unexcited about revisiting the issue.
In the coming months, it will be crucial for TNCs and insurers to continue to work together to make sure their hard work translates into law.
Toward that end, the white paper can be of some assistance. In essence, it highlights the questions for which the compromise has the answers. When presented together, legislators and regulators will be able to see just how well-considered and carefully crafted the deal is. Both documents are borne of negotiation and concession.
It is worthwhile to note that the NAIC Sharing Economy Working Group process, while at times painful, played a crucial part in allowing insurers and TNCs to come together outside of the hitherto exclusively adversarial legislative context. Such a role is where the NAIC can really excel, particularly when it acts quickly to provide a forum and embraces and encourages involvement on as broad a scale as possible.
Commissioner Jones and his staff at the California Department of Insurance should also be lauded for their time and commitment to the issue, as should the staff at the NAIC. Together, their patience and dedication was responsible for the creation of a forum that should, itself, be considered as a model of openness and fairness.
Thus, while “No Action Is Contemplated” will continue to get chuckles, those close to the process know that, at least sometimes, the NAIC really can get stuff done.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
By Josiah Neeley in the American Conservative
R Street Executive Director Andrew Moylan recently joined Jesse Hathaway, managing editor of the Heartland Institute’s Budget & Tax News, for a discussion of recently reintroduced proposals to grant states the authority to collect taxes on remote sales from businesses not located within their borders. You can hear full podcast here.
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
First came his signing of the Taxpayer Protection Pledge in 2010, which reads: “I, Robert Bentley, pledge to the taxpayers of the state of Alabama, that I will oppose and veto any and all efforts to increase taxes.”
That sounds pretty clear to most Alabama voters, and signing it made plenty of political sense for Bentley’s gubernatorial aspirations. The last time voters directly faced a sizable tax increase, one supported by the Business Council of Alabama and a powerful Alabama Education Association, 68 percent of them soundly defeated it.
Not surprisingly, as a popular governor highlighting his “right-sizing” of government and honoring his pledge not to raise taxes, Gov. Bentley cruised to re-election in 2014. Never did Gov. Bentley suggest during his re-election bid that he would push tax hikes if he found his streamlining efforts to be insufficient to keep state budgets in the black.
The governor did not find out about the General Fund budget issues after the 2014 election. He knew the budget challenges facing the state’s General Fund as early as 2011. In 2012, Alabama approved a constitutional amendment moving $437 million to the state’s General Fund from the Alabama Trust Fund over three years. If the General Fund was fine, why did it need the infusion of cash?
Then came the waffle.
Bentley explained his evolving stance by saying, “I did sign a no-tax pledge my first four years. I did not sign it the last four years.”
“What we did the first four years, we streamlined, we cut, we consolidated, we did everything that was necessary to make our state more efficient and we’ve done that,” he said. “Now, it’s halftime, little bit past halftime in fact, but we don’t have enough money to fund the general fund.”
Apparently nobody mentioned to Bentley that a conservative governor is not supposed to increase taxes after halftime.
The governor initially couched his tax plan as an ugly necessity but seemed resigned to letting the Legislature develop its own response. After all, he encountered so much resistance seeking Republican sponsors for his tax measures that Democrats introduced bills for him.
Alabama’s governor is no longer reluctantly resigned to simply proposing tax increase; he is leveraging state highway funds against legislators and touring the state to garner support for his tax hikes. He even has a tax-exempt organization promoting the tax increases on his behalf.
“Please give your legislators some cover,” he said to a meeting of the Birmingham Business Alliance. “It’s hard to vote for a tax, especially if you ran on a no-tax pledge.”
In fact, it is hard to be credible at all if you make a pledge to your constituents, earn their vote and then violate that critical promise. The Bentley many Alabamians voted for is a straight-shooting doctor who loves Alabama and told them he would not raise their taxes.
If that were not enough, one of the governor’s chief jobs is to convince businesses that Alabama is a better place to invest than neighboring states. While those states are exploring ideas like reducing their income tax or eliminating it entirely, Alabama’s governor is pounding pavement asking for a net tax increase. Which sounds like a better economic sales pitch to you?
Now things are just getting plain strange. Gov. Bentley is trying to persuade Alabamians that his tax increases are conservative. “There is nothing more conservative than paying your debts and getting your financial house in order,” he says.
Paying off debts and financial stewardship are conservative ideals, but a several hundred million dollar tax increase is not. Period.
Unfortunately for Gov. Bentley, most state legislators know that the political costs of reducing state government and eliminating services is far less than voting to increase taxes and grow government. If the people of Alabama want a tax increase, they will elect politicians to do just that.
They have not, and I am willing to bet that reality does not change the next time Alabama’s legislators are on the ballot and Gov. Bentley is not.
The U.S. Postal Service has an existential problem. For five years, the agency has flirted with insolvency. It has $15 billion in debt, its statutory maximum. According to its most recent financial statement, the USPS:
[C]ontinues to suffer from a lack of liquidity. Cash balances remain insufficient to support an organization with approximately $73 billion in annual operating expenses. The Postal Service’s average daily cash and cash equivalents balances during the three months ended December 31, 2014 were $5.7 billion, which represents only 21 days of operating cash.
To conserve cash, the agency has put off many capital investments. The service’s 140,000-vehicle fleet is more than two decades old and needs to be replaced. The Postal Service has not made any payments into its Retiree Health Benefits Fund since 2008, meaning its $50 billion in unfunded health-care obligations are not getting any smaller. The agency has tried to shave overhead costs by not replacing hundreds of thousands of retiring employees, and closing post offices or reducing their operating hours. (Most post offices lose money.) The agency also plans to go forward with closing roughly 80 of its mail-sorting plants. If Congress allowed it, the Postal Service would end Saturday mail delivery (except for parcels).
How the agency will escape its debt and return to financial sustainability is anything but certain. The service’s existential crisis, however, goes far deeper than finances. Its very raison d’etre has disintegrated. The act that birthed the modern, reorganized USPS declares:
The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people.
That was drafted in 1970. Back then, long-distance telephone calls were fantastically expensive for most consumers, and facsimiles were few. Pop songs of the time, like Rod Stewarts’ 1972 hit, “You Wear It Well,” spoke of lovers writing precious letters to one another. When letter carriers went on strike in 1970, President Richard Nixon took to television to announce that he would contend with the threat. National Guardsmen were sent in to replace the wildcatters. Mail was king and the Postal Service could expect to reap profits as a monopolist.
Those days are long, long gone. As Elaine Kamarck previously pointed out on FixGov: “To understand this crisis of obsolescence, all you really need to do is ask yourself when was the last time you got an actual letter, addressed to you in the mail with a stamp on it. Even Christmas cards and wedding invitations are going electronic.” At most, 5 percent of all mail sent is personal correspondence. Magazines of all stripes (The Economist, the now sadly defunct Cat Fancy, etc.) are a mere 3.5 percent of what USPS delivers. More than half of all sent mail is advertising.
Mail is what the Postal Service does and it no longer “binds the nation…. through correspondence.” Mail today is not a communications medium; it is a broadcast medium for businesses.
Indeed, from a 21st century perspective, the USPS looks like a hopelessly retrograde enterprise. We cut down trees, mill them into paper, print words on the paper, then transport the paper all over America in pollution-belching trucks, and have people deliver them (often on foot) to 150 million addresses. Then people throw most of it away unopened. (That junk mail-thwarting companies like Catalog Choice exist testifies to the love lost for mail.)
Meanwhile, I can e-mail my sister in Ohio, text my nephew in New Jersey, Facebook message my friend in Russia and video chat with my mother for little to no cost, and without environmental damage. So why do we need a Postal Service?
To be clear, the Postal Service cannot be abolished; at least, not immediately. Many institutions’ operations remain tied to it. Local governments send jury summons, vehicle registration renewals and other important documents by mail. Voting by mail is widespread in the United States, and Colorado, Oregon and Washington hold all their elections by mail. Package delivery in America also is deeply dependent upon the Postal Service. FedEx and UPS have postal carriers deliver many small packages to sparsely populated rural areas. (It makes no financial sense for them to do it themselves, and USPS carriers are on the route anyway.) The Postal Service also is tasked by executive order to deliver medicines in the event of a terrorist biohazard attack.
Many of the legislative reforms proposed in recent years dodge the existential question, and instead take for granted that the government should lug paper mail all over America’s 3.8 million square miles. Finding any significant reform that suits the two biggest interest groups (USPS unions and high-volume mailers) is very difficult. Senators from low-population and far-flung states tend to be especially averse to reforms that reduce the massively subsidized service their constituents receive.
But eventually, a day of reckoning must come. A government operation that goes bankrupt is unlikely to be bailed out by a public who sees it as a pointless, environmentally harmful anachronism.
From the Washington Post:
“In general it’s a move in the right direction,” said Eli Lehrer, president the R Street Institute, a conservative Washington think tank, but doesn’t go nearly far enough to fix a program that’s broken.
Discounted insurance is “expensive for taxpayers and encourages people to live in harm’s way,” Lehrer said. “Stupid, rich people who want to should be allowed to build wherever they want to as long as taxpayers don’t have to bail them out.”
The attached written testimony was submitted by the Congressional Data Coalition to the Senate Committee on Appropriations Legislative Branch Subcommittee regarding appropriations for open government data as part of the proposed Fiscal Year 2016 appropriations for the secretary of the Senate, the Library of Congress, the Government Publishing Office and the sergeant-at-arms.
When people think of Iowa, they almost instantly think of corn. Iowa is the nation’s largest producer of the stuff, and also has become famous (or infamous) for corn-derived ethanol. Presidential candidates who hope to win the state’s first-in-the-nation caucuses often pledge their support for the federal Renewable Fuel Standard, which mandates that gasoline must have a certain percentage of ethanol blended in.
But ethanol isn’t the only renewable fuel that Iowa farmers and state officials love. They also have an ongoing love affair with wind power.
Iowa is third in the country in the total amount of electricity generated by wind, placing it behind only Texas and California. According to a report earlier this year from Radio Iowa, the state generates 5,688 megawatts of electricity from wind power, with another estimated 550 megawatts of wind-production capacity under construction.
Iowa also leads the nation in getting 15.4 percent of its electricity from wind turbines, with some estimates putting the figure as high 27 percent of all Iowa homes powered by wind. Wind farms are located all over the state. The abundance of flat, open spaces means plenty of room for turbines. The state is also blessed with average wind speeds sufficiently high to make wind power feasible.
The wind industry in Iowa is supported by state subsidies. Iowa has a production tax credit of 1 to 1.5 cents per kilowatt hour of energy produced by a wind turbine. The federal production tax credit expired at the end of 2014. A Senate vote to reauthorize it was defeated in January.
Getting the federal wind tax credit reinstated remains nearly as much of a priority for state officials and Iowa’s agricultural community as preserving the Renewable Fuel Standard. The wind industry, which currently employs 4,000 Iowans and continues to grow, has generated millions of dollars of lease payments for Iowa farmers. Iowa officials claim increased wind production has helped attract technology companies to the state. Iowa was also the first state to create a renewable portfolio standard, but set at a relatively low 105 MW.
At the recent Iowa Ag Summit, many of the likely presidential candidates pledged their support not just for the RFS, but for renewing the federal wind tax credit. While a couple of candidates, most notably former Texas Gov. Rick Perry and Texas Sen. Ted Cruz, came out against federal subsidies for wind, these were exceptions to the rule.
Since the federal production tax credit has already expired, Congress should not renew it. The wind industry needs to stand on its own feet and compete in the free market.
Iowa should also phase out its wind production tax credit. Given the abundant wind resources and advancements in wind turbine technology, the wind industry can compete in the free market in that state.
Finally, Iowa should consider joining the states who have deregulated electric services. If Iowa customers want to choose utilities that generate electricity from clean sources, they should be allowed to do so. Deregulated utility states are able to provide options to help customers lower their bills over traditional regulated utilities.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
In the 21st century, why does the State of Alabama need to be in the liquor business? Frankly, that is the question state legislators need to consider, and Sen. Arthur Orr, R-Decatur, believes that removing the state from the retail liquor business is the answer.
Conservative officials in the state constantly repeat the refrain of limiting the role of government to its legitimate functions. Phasing out many aspects of Alabama’s Alcoholic Beverage Control Board brings that ideal to life.
To be clear, Alabama’s ABC Board is one of the better-run government agencies in the state. ABC Administrator Mac Gipson and his team run a complex system that, among other responsibilities, operates 176 ABC stores and oversees licensing and compliance for more than 550 privately operated package stores.
Gipson proudly points to the fact that the ABC Board pays for itself and alcohol sales generate important revenues for the State of Alabama. All that is true.
Oddly, it would probably still be true even if Orr were successful at phasing Alabama out of the liquor-retail business.
Alabama’s taxes on liquor are almost identical regardless of whether a bottle is sold by a private package store or a public ABC store. Currently ABC assesses an additional 30 percent markup on the cost of the liquor sold at ABC stores. Of that amount, 25 percent goes to operate ABC and 5 percent goes to Alabama’s General Fund.
Orr’s bill would eliminate the cost of more than 600 employees and the expense of leasing ABC stores from the ABC Board’s operational cost. While the move would undoubtedly incur one-time costs associated with eliminating those positions, those costs are far less expensive than the ongoing salaries and benefits of those state employees.
While nobody should relish the idea of eliminating anyone’s job, state employees should not be immune from the same type of industry changes that routinely occur in the private sector.
If the ABC Board reduces its operational costs, it should be able to preserve its 5 percent allocation to the General Fund, cover its distribution and compliance responsibilities and possibly even reduce its markup. If the markup is preserved and sales remain consistent, there should be even more revenues to distribute to state and local priorities.
In the alternative, Gipson has argued that the social costs of ending ABC’s retail operations would hurt Alabama. “Increased availability (that would come with privatization) would lead to increased consumption, especially among underage and problem drinkers,” he writes.
Under Orr’s bill, ABC’s compliance operations would be preserved. Alabama law enforcement routinely combats unlawful sales to minors, intoxicated driving and any number of other negative activities related to alcohol. Thankfully, they do a good job, and the ABC Board’s annual reports highlight successful enforcement activities over the past several years.
The social impacts of closing the 176 state-run stores are also less significant given the fact that Alabama already licenses around three times more private package stores where consumers can purchase alcohol outside of ABC store hours. The fact that Alabama already has so many more private stores than public ABC stores suggests that the ABC Board, which issues the licenses, is not terribly concerned that private stores are the hotbeds of unlawful and dangerous alcohol-related activity they now suggest.
Frankly, Alabama should revisit a number of aspects of its policies toward liquor. A move to a gallonage tax, as opposed to assessing tax on the cost of the liquor, could have positive revenue implications and address some concerns about consumption.
At the end of the day, the fundamental question remains: Should Alabama be in the retail liquor business? The answer should be a resounding “No.”
From NJ Poker Online:
The two witnesses that helped to actually put a negative spin on RAWA were Parry Aftab and Andrew Moylan. Aftab is an attorney that specializes in Internet Privacy and Security. Moylan is a well known states’ rights advocate.
Moylan chose to focus primarily on the issue of states rights and how they applied to RAWA. He asserted that the bill was an overreach of authority by the federal government and that the bill would restrict states’ rights. Interestingly enough, Moylan is opposed to gambling but his belief in states’ rights allows him to put those oppositions aside.
Chairman, members, my name is Josiah Neeley and I am the Texas director of the R Street Institute. R Street is a non-profit, free-market think tank headquartered in Washington, D.C., though I am based out of Texas. I’m here today to speak in favor of this necessary legislation.
H.B. 40 and S.B. 1165 clarify that the state has exclusive jurisdiction over certain types of oil and gas regulation, and pre-empts local ordinances that seek to prohibit oil and gas production. The bill allows local regulation of “quality of life” issues related to production, such as noise, traffic, and odors, so long as these are reasonable and do not amount to an effective ban.
The main impetus behind this bill was the recently passed ban on hydraulic fracturing in Denton, Texas. Unfortunately, there has been a lot of misinformation put out on this issue by opponents of fracking. The reality is that fracking has never been found to contaminate groundwater. This is the conclusion not only of academic studies by MIT, but also of government officials from the Environmental Protection Agency, the Department of Energy, the U.S. Geological Survey and others.
In fact, the fracking revolution has had substantial environmental benefits, both for Texas and for the nation as a whole. Levels of carbon emissions in the United States are at a 20-year low, and one of the main reasons for that is fracking. Low-priced natural gas has displaced coal as a source of electricity, and since carbon emissions related to natural gas are only around half of those of coal for a given amount of energy produced, the result has been a substantial decline in carbon emissions. Nor is this effect limited to greenhouse gases. Whether we are talking about particulates, sulfates or water usage, the impacts from natural gas are lower than from coal. The market-led movement away from coal power due to fracking has therefore been a major boon to the environment.
Many opponents of this legislation have suggested that it is inconsistent with local control. Ultimately, local governments are creatures of the state. They have only those powers granted to them by the state government, and there are many examples of state law restricting the ability of local entities to regulate in a particular area. The Texas Railroad Commission permits wells, and monitors oil and gas production to ensure compliance with health and safety restrictions.
Local control does not give cities the right to ignore these state regulations if they wish. Nor should it give them the right to pass additional regulations that are inconsistent with state law and policy. Where local ordinances are used to infringe on private property rights, it is appropriate for the state government to step in and defend these rights.
The third time will apparently be the charm for the Federal Communications Commission’s “net neutrality” regulations. Having been shot down twice by the courts in earlier attempts to regulate broadband, members of the commission—enterprising bureaucrats that they are—found new legal authority for their power grab.
However one feels about the new rules, it is inarguable that this is not how the founding fathers designed our government to operate. “All legislative powers herein granted shall be vested in a Congress of the United States,” reads Article I of the Constitution. To prevent its misuse, the awesome power to make laws was split between two chambers. By design, governance requires the diverse representatives of the governed to find consensus.
The first Congress had more than 90 voting members; the current one has 535. The FCC, by contrast, has 5 members, only 3 of whom agreed on the net neutrality rules. That was enough to promulgate 300 pages of regulations that have the effect of law.
The FCC’s action is all the more galling because Congress has been actively debating broadband legislation. Sen. John Thune, R-S.D., and Rep. Fred Upton, R-Mich., circulated a draft bill in January.
Of course, the FCC’s action was not a rare instance of unaccountable government. Today’s executive agencies make law as a matter of course, and generate a ton of it. At agencies’ current pace of about 4,000 regulations issued annually, a new federal rule is created roughly every two hours. Lay the 170,000 pages of the Code of Federal Regulations end to end and it would leave a trail of impenetrable text 29.5 miles long.
When one considers Congress enacts perhaps 50 meaningful statutes per year, it becomes plain that the first branch no longer is our nation’s primary lawmaking body. America has morphed into the expert-led state imagined by John Stuart Mill in his 1861 treatise Considerations on Representative Government. Civil servants devise policy and the legislature serves mostly as a pressure valve for the vox populi.
Instead of the function of governing, for which it is radically unfit, the proper office of a representative assembly is to watch and control the government; to throw the light of publicity on its acts; to compel a full exposition and justification of all of them which any one considers questionable; to [censure] them if found condemnable, and, if the men who compose the government abuse their trust, or fulfill it in a manner which conflicts with the deliberate sense of the nation, to expel them from office, and either expressly or virtually appoint their successors. This is surely ample power, and security enough for the liberty of the nation.
Mill’s conception is eerily prescient, but rather different from the government the American framers intended. In our constitutional system, agencies are created to execute the laws made by Congress. Toward this end, they are obliged to issue rules clarifying how a law should operate in practice. These rules should not expand the scope of the law as written or establish new powers beyond those explicated in the statute.
Emblematic of the modern administrative state was the Environmental Protection Agency’s “tailoring rule,” which targeted greenhouse gas emissions before it was struck down a year ago by the U.S. Supreme Court for attempting to “bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization.” Alas, that case was far from an anomaly. According to Sam Batkins of the American Action Forum, courts have invalidated more than a dozen regulations in recent years, issued by agencies ranging from the Department of Health and Human Services to the Securities and Exchange Commission. Undoubtedly, the FCC’s net neutrality rules likewise will be challenged in court, contributing to significant economic uncertainty for the broadband industry, major content providers and the peerage market that connects the two.
Congress at long last may be wearying of regulatory overreach. A spate of regulatory reform bills has been introduced recently.
- Sen. Pat Roberts, R-Kansas, proposes that agencies be limited to issuing regulations whose benefits justify their costs and are drafted to “impose the least burden on society.”
- Sen. Mark Kirk, R-Ill., has legislation that would slow the ceaseless growth of the Code of Federal Regulations by imposing seven-year expiration dates (“sunsets”) on some regulations.
- Sens. Roy Blunt, R-Mo., Angus King, I-Maine, Jeanne Shaheen, D-N.H. and Roger Wicker, R-Miss., advocate establishing a BRAC (Base Realignment and Closure)-type body, which would solicit public input on bad or outdated regulations and submit a package of proposed repeals to Congress, which would vote to keep or ditch the whole lot. It is an especially promising idea that Democrats will have a hard time opposing aloud.
- Sen. Rand Paul, R-Ky., and Rep. Todd Young. R-Ind., have reintroduced the REINS (Regulations from the Executive in Need of Scrutiny) Act, which would force congressional votes on economically significant regulations before they take effect. The REINS Act is a serious attempt to reclaim some of Congress’ legislative authority.
Getting the president to sign regulatory reform legislation is a long shot, but Congress is not helpless. The Congressional Review Act empowers Congress to stop a regulation before it takes effect. Any legislator may introduce a short CRA disapproval resolution to kickstart a process that grants Congress 60 days to approve the resolution and send it to the president. If the White House signs the resolution, the rule never takes effect.
The CRA was passed 19 years ago with bipartisan approval, spearheaded by Sen. Don Nickles, R-Okla., and signed by President Bill Clinton. Harry Reid, D-Nev., supported it, and Carl Levin, D-Mich., a longtime CRA advocate, cheered its enactment: “Now we are in a position to do something ourselves. If a rule goes too far afield from the intent of Congress . . . we can stop it. That’s a new day, and one a long time coming.” Unlike the REINS Act, the CRA is standing law and raises no separation of powers anxieties. Justice Stephen Breyer, by the way, gave congressional review a thumbs-up in a 1984 lecture.
A standard complaint about the CRA is that it will never work. A president will always veto bills that kill regulations written by his agencies. That may be true, but there is only one way to find out. Last week, Congress used the CRA against new pro-union regulations issued by the National Labor Relations Board. Presumably Obama will veto the resolution, but no matter. The next two years ought to be a particularly appealing time for Republicans to use the CRA. Any new regulations almost assuredly are the product of the Obama administration. At minimum, using the CRA to protest unwise proposed rules signals to constituents that a legislator is standing up for them, and against a not-very-popular president.
A tempest is brewing around California’s otherwise functional system of uninsured and underinsured automobile insurance. At an informational hearing held in the great Shakespearian tradition of dialogue capped by monologue, California state senators were treated to three hours of testimony by the state’s insurance officialdom, academics and stakeholders.
UM/UIM coverage is designed to offer first-party drivers the same level of coverage that they afford themselves, and no more, in the event that they are involved in an incident with a third-party driver without insurance coverage or without sufficient insurance coverage.
The need for the product is more than academic. Robert Herrell, deputy commissioner and legislative director of the California Department of Insurance, testified that between 9 and 14 percent of California drivers are without insurance. That proportion translates to roughly four million drivers; or, in concrete terms, at least one vehicle at every major intersection.
Against that backdrop, the narratives furnished by the various parties who testified were predicated on fundamentally different assumptions about the public policy role played by UM/UIM. When addressing the central question posed to them by the committee — “does uninsured and underinsured motorist coverage meet consumer needs?” – they cast their analyses from wildly disparate ports.
Proponents of reform see a system shackled by overly onerous fraud-prevention mechanisms and low policy minimums, not raised for decades, which do not reflect the real cost that confront drivers today. The threshold policy analysis was drawn from legislative history and stated inimitably by Robert Peterson, director of the Center for Insurance Law and Regulation at the Santa Clara University School of Law: is the current system sufficient to offer protection to “prudent individuals”?
Professor Peterson illustrated his case for four specific reforms by evincing a terribly unfortunate, if well-named, vessel named “Prudence.” Again and again, in spite of all of her best efforts, and not unlike Prospero’s daughter Miranda, Prudence was subjected to iniquitous outcomes in a series of counterfactual scenarios.
In particular: Prudence was unable to recover from her UM/UIM coverage when the driver that struck her carried liability coverage in the same amount (limit-to-limit trigger); she was unable to access her UM/UIM coverage in a scenario in which a near-miss forced her off of the road (miss-and-run); she was confused and frustrated when she was afforded the difference between her UM/UIM coverage maximum and the third-party insurer payout, instead of her outright coverage maximum (setoff); and she was left without access to her UM/UIM coverage when her settlement did not cross the threshold of the third party’s liability insurance limit (exhaustion).
These arguments for reform are not without merit. In fact, the supporters of the status quo, in at least some of Prudence’s scenarios, likely would concede that, while she is getting the benefit of her bargain with the insurer, she is on the unfortunate side of a larger public policy calculus. That consideration was the basis of their testimony.
While sympathetic to the plight of those who are confused, Hyon Kientzy, a defense attorney and proponent of the status quo, argued that the efficacy of the UM/UIM system is best evaluated on the basis of the system’s overarching affordability and applicability to the majority of cases. Toward that end, while the cost of medical treatment has increased, that fact is rendered largely redundant by a countervailing consideration — the vast majority of UM/UIM claims, around 85 percent, are still below the $15,000 policy minimum.
Proponents of the status quo also urged senators to consider the proposed reforms in light of the auto insurance system as a whole. John Norwood, a longtime legislative advocate and representative of the Insurance Agents and Brokers of California, drew upon considerable institutional memory to remind those present that California’s current UM/UIM system is itself a compromise measure, crafted in 1984 as a conciliatory arrangement amid an escalating auto-insurance affordability crisis.
For their part, the senators on-hand consistently demonstrated interest in educating consumers about the benefits of UM/UIM coverage. While their interest is understandable, it has yet to be seen what further measures are practical, given that UM/UIM coverage already requires conspicuous declination.
What is clear is that, when policymakers consider how and if to proceed with reform, they will need to be keenly aware, as Prospero’s brother Antonio was, that “what’s past is prologue.” Any small reform must be considered in view of the system as a whole, and how it came into its current incarnation.
California, laboring under Proposition 103’s restrictions, has for the past 25 years sat precariously at an inflection point. Increasing the applicability or scope of UM/UIM coverage will, as was conceded by proponents of reform, raise premiums. Who knows what sort of storm that could cause?This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Michigan has experienced a dynamic economic reinvention over the past five years. Individuals young and old have turned their new ideas, artisanship and creativity into sustainable employment opportunities for themselves and others.
The state’s continued economic improvement reflects the prospects that ride-sharing companies like Uber or Lyft offer drivers and consumers.
These transportation network companies, or TNCs, allow individuals to summon cars with their smart phones, creating new job opportunities for independent drivers who use the app to connect with potential customers.
Often, the prices of TNC rides are considerably less than taxis. They provide a growing number of drivers the autonomy to use their own cars and the flexibility to set their own schedules, driving when it is convenient for them.
The rise of TNCs has been an excellent opportunity for a growing fleet of new drivers who have turned their personal cars into successful enterprises.
Unfortunately, a couple of overzealous Michigan lawmakers are trying to create barriers that could stall out this new industry.
Citing concerns that ride-sharing is “out of control,” state Sens. Rick Jones, R-Grand Ledge, and Dale Zorn, R-Ida, have introduced legislation that would require TNC drivers to jump through a number of new regulatory hurdles in order to be active drivers, including a requirement to receive and maintain a Michigan chauffeur’s license.
Currently in order to become a driver for TNCs such as Uber or Lyft, one must possess a valid drivers’ license, pass a background check and have appropriate auto insurance.
A recent Cato study actually found that the requirements to join Uber or Lyft “are often more strict than those imposed on taxi drivers in some of America’s most populous cities.”
In addition to these standards, customers routinely rate drivers. If a driver falls beneath a ratings threshold, they are no longer eligible to provide rides. The continuous feedback instills more consumer confidence than relying on taxi companies to review their drivers. With the incentive of good ratings, many drivers serve water, candy and even let the passenger control the music selection, all while driving their passenger safely to his or her destination.
As long as you have a valid driver’s license, pass a background check and have a safe driving record, there is no reason why further special licensing should be required. The senators’ proposal to require a chauffeur’s license is another example of burdensome occupational licensing that stifle entrepreneurs from bringing their sought-after skills to market. If someone is legally eligible to drive their car in Michigan, why should they be required to get additional permission to drive someone else in their car?
A recent Brookings Institution study examines how the rate of occupational licensing has increased dramatically over the last several years. Currently, 30 percent of the U.S. workforce is subjected to occupational licensing. While some licensing in certain highly specialized vocations might make sense, the exponential growth in occupational licensing has been used to keep out competitors and inflate the costs of services to consumers, stifling innovation and suppressing economic opportunity.
It is true that ridesharing presents legitimate questions about auto insurance. However, a number of states already have passed careful legislation and private companies are finding the right balance to address those concerns without eliminating an emerging market. Moreover, the ride-sharing and insurance industries increasingly are finding common ground on these questions.
Instead of implementing regulations that erect yet more impediments to entrepreneurs, lawmakers should be looking for ways to break down bureaucratic barriers for the entire workforce.
Michigan’s economy will only continue to grow if elected officials take their foot off the brakes, ending unneeded licensing requirements and looking for new ways to spur opportunity for all.
In what counts as excellent news both for Florida taxpayers and the private insurance market, Gov. Rick Scott and the State Board of Administration have approved a request from the Florida Hurricane Catastrophe Fund to explore transferring up to $2.2 billion in risk back to the private market.
The board’s trustees – comprised of Scott,Chief Financial Officer Jeff Atwater and Attorney General Pam Bondi — gave Cat Fund CEO Jack Nicholson authority to hire a broker and test the waters for what would be the Cat Fund’s first retrocessional plan. The deal could include a combination of traditional and collateral reinsurance, catastrophe bonds and other insurance-linked securities. However, any final deal would still need the board’s formal sign-off, likely at its next meeting April 14.
The approval was welcomed by the Stronger Safer Florida coalition, of which R Street is a member, which issued the following statement:
Stronger Safer Florida commends the State Board of Administration for authorizing the Florida Hurricane Catastrophe Fund to seek opportunities to transfer risk away from Floridians and onto the global private reinsurance market. If attractive reinsurance rates exist for Florida, it would be wise for the Cat Fund to act so policyholders are less likely to face hurricane taxes in the event of a future hurricane.
The Cat Fund’s proposal follows similar moves by Florida’s other state-run insurance entity, Citizens Property Insurance Corp., which recently announced it is projected to drop to its lowest policy count since it was first created (through the merging of the state’s FAIR plan and coastal pool) in 2002.
Previously reliant almost entirely on the Cat Fund for reinsurance coverage, Citizens has looked to take advantage of attractive market conditions with a significant move toward private reinsurance in recent years. Citizens had $3.1 billion of private coverage in place during the 2014 hurricane season, including the $1.5 billion Everglades Re catastrophe bond, the largest cat-bond issuance in history.
It’s thus a natural fit for the Cat Fund to explore similar territory, particularly since projections show private risk transfer would have either negligible effects on property insurance rates, or at worst, rate increases of less than 1 percent. However, when the Cat Fund previously floated the idea of $1.5 billion in risk transfer last year, the SBA shot that notion down.
The board’s tentative approval came over the objections of some coastal politicians, notably state Rep. Frank Artiles, R-Miami, who stretched credulity in making the case that moving risk back into the private market constituted “corporate welfare.”
The proposed transfer of billions in risk from the Florida Hurricane Catastrophe Fund to the private offshore global reinsurance market is nothing more than corporate welfare and would mean higher property insurance rates for Floridians. If CAT Fund Chief Operating Officer Jack Nicholson is permitted to gift $2 billion into the private re-insurance market, the only beneficiaries would be the reinsurers themselves, mostly based in Bermuda.
It would be difficult to overstate just how backward this is. The existence of the Cat Fund itself is the clear corporate welfare in this case, as it is intended to provide coverage to primary insurers at rates below those charged in the private reinsurance market through use of state-granted bonding and assessment authority to finance losses after they’ve occurred.
It’s also clear from his comments that Mr. Artiles has some difficulties understanding the very concept of insurance. The beneficiaries of risk transfer are the people who otherwise would shoulder the burden of that risk – in this case, taxpayers and policyholders throughout the state, who only this month finally finished paying off the hurricane taxes from the 2004 and 2005 seasons. Bermuda reinsurers are no more the beneficiaries of this change than any insurers writing any business anywhere. They’re taking on risk. Whether that risk proves to be fortuitous is something only time will tell. The opportunity to trade a potential large loss for a small but certain one is the reason we buy insurance in the first place.
Of course, given conditions in the ongoing soft market for North American property catastrophe reinsurance, reports indicate that private cover is now actually priced more attractively than even the Cat Fund, prompting some Florida insurers to explore ways to replace Cat Fund coverage with cessions to the private market. Most recently, Heritage P&C announced plans to issue a $150 million cat bond, largely to replace Cat Fund coverage. Keefe, Bruyette & Woods analysts Meyer Shields and William Hawkins project as much as a quarter of the Cat Fund’s $17 billion in coverage ultimately could be replaced with private cover.
SBA Executive Director Ash Williams also this week separately (and, in our view, wisely) rejected a suggestion by Investment Advisory Council Vice Chairman Chuck Cobb that the fund should divert its $13 billion in assets into potentially higher-return – but also higher risk and less liquid – investments. The Cat Fund’s allocations currently largely sit in cash or short-term high-quality instruments. They earned returns of 0.18 percent over the past year an annualized 1.74 percent over the past decade, beating custom benchmarks of 0.03 percent and 1.66 percent, respectively.
The reason for the fund’s allocation “is, if nature goes the wrong way and we get a real blow and we need that money, we’re going to need it then and we’re going to need all of it, not have it tied up somewhere,” Mr. Williams said at the Dec. 8 meeting, according to its minutes.Creative Commons Attribution-NoDerivs 3.0 Unported License.
From Casino City Times:
Andrew Moylan, who runs the pro states’ rights R Street Institute, and Aftab came to the hearing prepared with facts and arguments about why regulated intrastate online gaming is good for states’ rights and good for consumers. Aftab noted that there were three cases in Nevada where kids managed to play online poker at a regulated site. She also explained in a fair amount of detail how identity verification works. Moylan explained exactly how the assumption that Internet commerce (and other activities) can only be regulated by the federal government “eviscerates” the commerce clause in the Constitution. They upheld the honor of the room.
The bill’s critics talk about the Constitution and benefits of state regulation. Andrew Moylan, executive director of the R Street Institute, a free-market think tank, cautioned that the bill as currently written sets dangerous precedent “in suggesting that mere use of a communications platform like the Internet subjects all users and all activity to the reach of the federal government, no matter its location or nature.” Parry Aftab, executive director of WiredSafety, a consumer-protection company, said state regulators were doing a great job of keeping children off the sites and curbing traffic to offshore online gambling shops, which have no interest in screening customers. “The best way to protect families and consumers in connection with online gambling is regulating it, not prohibiting it,” she said.
From the Huffington Post:
As with many congressional hearings, the experts who testified at the RAWA session did little to sway the members who attended. They included three witnesses who supported RAWA — John Kindt, professor emeritus at the University of Illinois School of Law; Les Bernal, national director of the Stop Predatory Gambling Foundation; and Michael Fagan, an adjunct professor at the Washington University School of Law. Two other witnesses — Andrew Moylan, executive director of the free-market think tank the R Street Institute, and Parry Aftab, executive director of the Internet-safety coalition Wired Safety — opposed RAWA.
A late addition to the witness list, Andrew Moylan, Executive Director and Senior Fellow at R Street Institute, opposed the bill on the basis that it infringed states’ rights guaranteed by the 10th amendment. Les Bernal, National Director of the Stop Predatory gambling Foundation, opposed all gambling.
There were two witnesses that stood against RAWA. Andrew Moylan, the Executive Director at R Street (a libertarian and conservative think tank), evoked memories of the government’s surveillance actions that were exposed by Edward Snowdon. The government is “too large and too powerful,” Moylan stated, and RAWA was an attempt to regulate “all wire or internet transmissions” as he explained his reasons for opposing the bill.