What I Learned As a Regulator

Abstract

I have thought a great deal during the past year about this address, mostly trying to figure a way out of doing it. I once had an elected commissioner tell me that it was far more difficult to run for office among your peers (say, for office in the legislature) than to seek votes from the general population. I suspect the same comparison applies to giving a Presidential Address. I'm going to ask your permission to deviate from tradition in a couple of ways. First, you will note that I don't have any cartoons, pictures, graphs, or charts. I have no bullet points. In fact, I'm not using PowerPoint at all. Instead, I just want to talk to you, and I hope you will humor me in that request. Second, I have given much thought to what I would talk to you about. I did the obligatory reading of the prior presidential addresses looking for ideas, but no luck. Mary Weiss suggested at one point that I talk about regulation, given that I spent over 10 years doing that, and it was not that long ago. I have taken that suggestion to heart. So I'm not going to talk about the traditional topics of the history or future of American Risk and Insurance Association (ARIA) or of our discipline. I'm also not going to try to give a scholarly address on regulation, or to talk to you about federal versus state regulation. Instead, I just want to share with you some of my experiences as commissioner, what I learned from the job, and some of my thoughts after returning to academics. I want to start by telling you how I got into the position of insurance commissioner. This is a story I have told before, and I know some of you have already heard it. I apologize to those of you, but I enjoy telling it, so I'm going to do it again. In May 1994, I was on the faculty at Drake University in Des Moines. The then-Iowa insurance commissioner-Dave Lyons-resigned suddenly at this time to take the job of director of economic development. I had come to know several regulators over the years-particularly financial regulators-because of some educational work I had done for them. One of them called me to suggest I consider applying for the position. My initial reaction was to dismiss the idea. But the seed had been planted, and I went home and started to think about it. I called my father-Emmett Vaughan-who was a longtime professor of insurance at the University of Iowa, to get his advice. By the way, Karyn, who just received the Hedges Award, is the first Vaughan Scholar at the University of Iowa, and I couldn't be more pleased. My dad said he thought the idea was insane. I was an academic, not a politician. As I recall, he said I'd get eaten alive, or something like that. These were probably the words of a father trying to protect his daughter. Anyway, we talked about it for quite a while. I gave him all of the reasons I was interested in doing this-most notably that I could gain an understanding of how things really worked from the inside. Finally, he said he could see why I might be interested in it and why it might be a good experience, and then he closed with one piece of advice. "Try not to get indicted in the process." For those of you who are younger, that has periodically been a problem for insurance commissioners. So I said, "Well there's a goal." I spoke to the Dean who agreed to give me a 2-year leave of absence if I got the job, dusted off my vita, and drafted a cover letter to send to the governor. To make a long story short, the governor called me in for an interview and subsequently offered me the job. My motivation, as I said, was not so much a drive to do good, to make a social contribution, as it was to do something interesting and to learn something in the process. And the first several weeks were a great learning experience. My initial observation involved the intensity and the great diversity of the issues. Let me just give you a feel for the first month. The first day on the job, I was approached by the chief of the securities bureau. …