Frankel
Case Sparks New Debates
By ADAM GORLICK, AP
04:37 PM ET 09/19/00
WASHINGTON (AP) _
Insurance companies, state regulators and federal
lawmakers agree Martin Frankel took advantage of
shortcomings in state insurance rules to swindle more
than $200 million from insurance companies. But they're
divided over whether imposing new federal regulations
would safeguard against similar fraud in the future.
Currently, individual
states regulate insurance companies without federal
oversight. And a congressional report released this week
shows that a lack of uniform policies and communication
among state agencies allowed Frankel to concoct what
investigators say was a $200 million embezzlement scam.
In testimony submitted
to a House subcommittee that held a hearing on the
report Tuesday, Michigan Rep. John Dingell said state
insurance regulators ``were either too blind to see, or
too unwilling to acknowledge, the scam Mr. Frankel
perpetrated, openly and fearlessly, over a period of
eight years.''
He says federal
regulations will be needed if states don't quickly
become better industry watchdogs.
Federal investigators
say Frankel ran an unlicensed insurance brokerage from
his fortress-like Greenwich estate. He disappeared in
May 1999, leaving behind piles of smoldering documents.
He was arrested in Germany months later with a bundle of
loot, and convicted on passport fraud and tax evasion
charges. He is now fighting extradition to the United
States where he faces embezzlement charges.
Investigators say
Frankel bought small insurance companies in Tennessee,
Mississippi, Arkansas, Oklahoma and Missouri and raided
them.
The Frankel case is
giving insurance companies and state and local officials
the opportunity to discuss whether the industry should
be federally regulated.
Insurers are split on
the issue. Some say uniformed regulations are needed;
others say the creation of federal rules will disrupt a
multibillion dollar industry.
The National
Association of Insurance Commissioners, a group of state
insurance regulators, wants Congress to let each state
make its own improvements. They say a law enacted last
year already puts in place stricter state regulations
that could guard against the type of scam investigators
say Frankel pulled off.
``We don't see that
legislation is necessary,'' said Lee Covington, a NAIC
chairman.
Philip Urban, who
testified on behalf of three groups representing
insurance industries, agrees.
``My company and the
other companies I represent today do not see federal
regulation as an appropriate approach to modernization
of state regulation,'' said Urban, who is also the
president of the Grange Insurance Companies.
Urban said federal
regulation could stifle competition among insurance
companies and bog them down with paperwork.
But Drayton Nabers
Jr., chairman of the Protective Life Insurance Company,
said a federal regulatory system is worth considering.
Representing the
American Council of Life Insurers, Nabers said a federal
regulation system would mean insurance companies
operating in more than one state would have to deal with
only one regulatory agency. However, he acknowledged
that companies doing business in a single state might
prefer a more simple and less expense state regulatory
system.
``For the insurance
business to remain viable and serve the needs of its
customers effectively, our system of insurance
regulation must become far more efficient,'' Nabers
said. ``This is not a call for less regulation. It is a
call for strong regulation administered efficiently.''
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