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The importance of regulatory outreach…

In surveys and anecdotal discussions, fraternal leaders cite “political advocacy” as the most important benefit of Alliance membership. And most often those leaders will point to the Alliance’s work to promote, protect, and preserve fraternals’ federal tax-exempt status as the most important public policy issue for which we advocate.

I don’t want to diminish for a moment the effort the Alliance puts into or the results we achieve on the tax exemption issue. Whether through meetings between key staff and Members of Congress (I have several of Capitol Hill visits scheduled for this week); the constant interaction between our advocacy firm with legislators and their staffs; our biennial “Day on the Hill” event where dozens of fraternal executives meet with lawmakers in Washington, D.C.; or broad-based grassroots campaigns, like the 2016 “Race to 100” program where employees, agents, and members are encouraged to help recruit co-sponsors for H.Con.Res. 19, the tax exemption issue is ALWAYS a priority for the Alliance.

Illinois capitol

But in recent years we’ve focused an increasing amount of time, energy and resources on state regulatory outreach – and it’s paying dividends for members. Here’s a brief look at two recent developments and one upcoming development in the state regulatory arena that I thought you should be aware of:

  • Ohio Department of Insurance – On January 27, the Alliance worked with the Ohio Department of Insurance (ODI) to schedule a special meeting for leaders from all of the state’s ten domiciled societies to review the legislative language and the proposed rules for the state’s Corporate Governance Disclosure law. Such corporate governance disclosure requirements will be mandated by every state within the next few years and will be applied to all insurers – publically-traded, mutual, privately-owned, reciprocal, and fraternals. The Ohio meeting provided fraternals the opportunity to review and discuss the specific requirements contained in the legislation, regulators’ expectations for compliance with the disclosure requirements, and the impact such requirements would have on regulatory examinations. Alliance member societies were not shy about asking questions of regulators and ODI officials were open and honest in their responses. When one member asked why regulators felt it was necessary to mandate such disclosure requirements in the first place, regulators responded by saying that “70 percent of regulatory interventions can be linked directly to poor governance issues.” ODI regulators cited instances of insurers outsourcing functions to third parties with very little oversight over those consultants’ actions, and non-participating and unqualified board members as the key problem areas. The regulators summed it up by stating, “We don’t want to run your companies, but we want to make sure that someone (i.e. the executive management team and the board of directors) is.” The bottom line is that this meeting helped build on what was already a solid working relationship between Ohio-domiciled societies and the agency responsible for their oversight. And when those types of relationships exist, many potential problems can be effectively worked out without regulatory confrontation or intervention.
  • Illinois Department of Insurance – Less than a week later, Alliance staff had the opportunity to meet with the newly-appointed Director of the Illinois Department of Insurance Anne Melissa Dowling, Deputy Insurance Director Jim Stephens, and several other key officials with the DOI. Illinois, like Ohio, is a state with a significant number of domiciled fraternals and, as such, regulatory actions taken in the Land of Lincoln can impact fraternal regulation in other states and at the NAIC level. Director Dowling was the former Deputy Director of Connecticut (the home state of the Knights of Columbus) and was more than a little aware of the fraternal model and the positive impact societies have in the communities they serve. She was impressed by the diversity of the fraternal community in Illinois and both she and Deputy Director Stephens were pleased to learn of the Alliance’s commitment to good governance and of our extensive corporate governance education programs. This meeting was an important first step in improving fraternals’ relationship with the Illinois DOI, a relationship that had its contentious moments over the past few years. However, by opening lines of transparent and honest communications and sharing our respective public policy priorities and objectives, we’re on much firmer ground with Illinois regulators. The next step would be to schedule a meeting with leaders from all the state’s domiciled societies to discuss regulatory matters – from governance to sustainability. Look for that to happen sometime later this year.
  • Pennsylvania Department of Insurance – Finally, I will be leading a small delegation of current and former Alliance Board members, as well as a representative of the Pennsylvania Fraternal Alliance, in a meeting with newly-appointed Pennsylvania Department of Insurance Deputy Director Joseph DiMemmo in Harrisburg, Penn., later this month. Mr. DiMemmo is taking over the reins from long-time Deputy Director Steve Johnson, who retired on December 21, 2015. I don’t have to tell you about the importance of a positive working relationship with Pennsylvania regulators. No state has more domiciled fraternals or a larger footprint on fraternal regulatory issues at the NAIC than the Keystone State. The significant turnover of key officials at the PA DOI in recent months makes building a relationship with Deputy Director and his team imperative for the Alliance. A larger meeting with Mr. DiMemmo and all Pennsylvania-domiciled fraternals will almost certainly take place in conjunction with the Pennsylvania Fraternal Alliance’s annual “Legislative Day” later this year.

Outreach to state regulators on such mundane issues as corporate governance and fraternal solvency may not be as glamorous as working the tax exemption issue on Capitol Hill. But it is an increasingly important component of the Alliance’s advocacy initiative – and the benefits of your membership in the organization – that should not be overlooked.

One Response

  1. Thanks Joe! I could not agree more. I’d even go farther and say that as we’re primarily regulated by the states (even though the scene is changing somewhat), our reputation at the federal level is greatly affected by our relationships with state regulators.

    Your leadership, in helping us be proactive, is critical. Overall, fraternals don’t have many market conduct or other matters that put us in front of state regulators. Add in the fact that as a group we’re not very large, and we’ve got a situation where they don’t know us very well. Yet we need them to! We need to have a relationship before we have a problem or a need for them to help us address. I’m glad the Alliance has made this a focus, and it’s one that needs to continue.

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