Working with Regulators
What you need to know to deal with
your state regulators.
Matt Gaul, a former deputy
superintendent for life insurance at the New York state
Insurance Department, has returned to the private sector after
almost seven years as a regulator and enforcement attorney in
state government. In January, Matt joined Steptoe & Johnson
as a partner. I sat down with Matt to get his advice on the
relationship between brokers, agents and state
SINDER: What are your recommendations
for Council members when it comes to their relationships with
GAUL: It may sound like a bit
of a cliché, but the main thing is don’t be a
stranger. In states where you do a significant amount of
business, make sure you’re meeting with your regulators
on a regular basis.
But what if there’s no
particular issue or problem that you need to
The old adage is that the best time to make a friend is when
you don’t need one. Developing personal relationships
with the regulators before there is a problem can be
invaluable. Regulators also appreciate the producer
perspective. The carriers are in the insurance departments
regularly, often on a weekly basis. Agents and brokers need to
do the same.
How do you recommend going about
I think most people are surprised at how accessible their
state commissioners are and how open they are to short
meet-and-greet sessions. The average tenure of an insurance
commissioner in the U.S. is only about 14 months, so it is also
important to develop relationships with the civil service
What is the potential impact of
Governor Andrew Cuomo’s plan to merge the Insurance and
Banking Departments in New York?
The proposed Department of Financial Regulation (DFR)
legislation grants the new agency broad enforcement powers that
eclipse those currently vested in the Insurance and Banking
Departments and even those of the New York Attorney General.
The DFR would be empowered to investigate and prosecute any
financial fraud. The DFR would have the power to subpoena
documents, compel testimony, grant immunity from criminal
prosecution, and fine violators up to $5,000 for each
violation—an amount that dwarfs the $500 per occurrence
that the attorney general can impose under a similar consumer
fraud law. If this bill gets through the New York legislature
in anything like its current form, the governor, through his
appointee, will be able to do everything he and Eliot Spitzer
did at the attorney general’s office and more.
What are the three biggest mistakes
that people make when the government comes knocking?
First, never begin your relationship with government agents
by arguing that they don’t have the authority or
jurisdiction to do the investigation. You’ll almost never
manage to stop a government investigation in the early stages
with procedural arguments. Instead, you’ll succeed in
doing two things: (1) making it look like you have something to
hide, and (2) antagonizing people who have a tremendous amount
of power to determine the ultimate outcome of the
investigation. Even if you are right, there will be plenty of
time later in the process to press those arguments.
Second, don’t defend the business practices under
investigation until you know all the facts. The investigators
often know things you don’t.