Posted on 09 Mar 2011
The proposed consolidation of the New York State Insurance Department, New York State Banking Department and Consumer Protection Board is an unprecedented move in the state of New York. As a result, the New York Insurance Association (NYIA) requests that public policymakers consider the proposal carefully to ensure that the newly formed Department of Financial Regulation streamlines the regulation of insurance and reduces the cost of doing business for New York insurers.
In testimony prepared for delivery on Monday at the Senate Committee on Investigations and Government Operation, Senate Committee on Banks and Senate Committee on Insurance Legislative Hearing regarding the consolidation of state agencies, Ellen Melchionni, president of NYIA said property/casualty insurers have some concerns with the proposed consolidation as currently drafted, but will continue to work with the Governor’s office as well as the legislature to address these concerns.
“NYIA stands ready to work with the Governor’s office and the legislature on this matter,” Melchionni said. “Specifically we would like to address several key components for the insurance industry, including the broad powers granted to the Financial Fraud and Consumer Protection Unit that is duplicative of duties already carried out by the Attorney General’s Office as well as modernization of the examination and rate and form filing processes.”
“NYIA believes any proposed consolidation must accomplish real and substantial efficiencies,” Melchionni said. “This consolidation provides an opportunity. If done correctly it could be less costly and more efficient. However, if not done carefully, the consolidation could result in additional costs, create even less efficient processes and add further bureaucracy, which will only drive business out of the state.”
According to a 2006 study by the American Economics Group, the effective income tax rate for property/casualty insurers in New York is 13.4 percent compared to 8 percent for other industries—meaning insurers already pay 40 percent more in taxes. “The property/casualty insurance industry already pays more than 20 various taxes and fees,” Melchionni said.
“Any cost savings from the consolidation should lessen the tax burden on New York’s domesticproperty/casualty insurers. Reduced assessments on insurers to support this new Department of Financial Regulation would be heartily welcomed by NYIA—the need for a less costly and more efficient insurance regulatory agency is apparent.”
“A net savings of $1 million is anticipated for the 2011–12 budget for the Department of Financial Regulation as compared to last year,” Melchionni said. “NYIA recognizes that this is a step in the right direction and hope that more significant savings will be realized in future years.”
The insurance industry is a vital component of New York’s economy, employing more than 185,000 New Yorkers. The industry contributed $32.4 billion to the gross state product (GSP) in 2007, accounting for 3.4 percent of the state GSP.
The New York Insurance Association (NYIA®) is a state trade association that has represented the property and casualty insurance industry for more than 125 years. For more information about NYIA, visit www.nyia.org.