Meet Maryland Insurance Commissioner Kathleen Birrane

Kathleen Birrane was appointed Maryland Insurance Commissioner in May 2020. Prior to her appointment, she was a partner in the Insurance Sector and Litigation and Regulatory Practice Group at the global law firm of DLA Piper LLP. From 2002 until 2007, Birrane served in the Maryland Office of the Attorney General in the statutory position of Principal Counsel to the Maryland Insurance Adminstration (MIA).

On the following pages, the commissioner answers IA&B’s questions on her transition to the MIA, legislative proposals that would impose a fiduciary standard on the conduct of insurance producers, and her priorities while in office.

You previously served in the Maryland Office of the Attorney General before working for a private practice firm. What prompted your return to civil service?

The short answer is that the Governor’s Office reached out and asked if I would assume the post in light of Commissioner Redmer’s [former Maryland Insurance Commissioner Al Redmer, Jr.] shift to Maryland Auto Insurance [formerly MAIF]. While I was not seeking a change, I did not hesitate to say yes. First, I have great respect for Gov. Hogan, who is an extraordinary leader and public servant, and am honored to be part of his administration. Second, as the Governor’s Office emphasized when they contacted me, my background would allow a smooth transition, with a minimal learning curve, which was important given the state of emergency and the number of insurance issues playing out in light of the pandemic. So, it was the right thing to do, and I was happy to be given the opportunity to serve.

I am fortunate in coming to this position after having been counsel to the agency in the past and after many years of working with licensees and other sector participants as both in-house and outside counsel. That background gives me good and practical insight into the sector, including how regulated entities and their vendors currently operate, and what is on the horizon. I believe that I understand the state-based insurance regulatory framework and how to apply it so as to assure that the law is followed and consumer interests are protected, while also assuring a healthy, vibrant, innovative market. And, because I have worked closely over many years with regulators, licensees, vendors, and other stakeholders across a broad spectrum of regulatory and transactional issues – including recent work relating to technology and digital innovation – I feel that I have been able to hit the ground running and get up to speed on most issues relatively quickly. At the six-month mark, I can say that I am happy to have returned to civil service. It is absolutely the best job I have ever had.

We know that the advancement of insurance industry technology and innovation is of interest to you. Tell us more.

I’d like to see Maryland at the forefront of technological innovation. As an agency, we will be part of the drive within the National Association of Insurance Commissioners (NAIC) to use technologies, such as blockchain, to improve the speed and efficiency of regulation. Likewise, we will encourage the appropriate and controlled use of innovation, data analytics, and sophisticated modeling to deliver better and faster results for consumers, including product and pricing innovations and fully digital purchasing and claim experiences. We can deliver the kinds of innovation that modern consumers expect, while protecting data and consumers.

I will also work to attract InsurTech innovators to the state. Maryland is home to world-class educational institutions and is already a leader in tech-related degrees and business incubators. Under Commissioner Redmer’s leadership, through an Advisory Board that he founded, the University of Baltimore has established the first of its kind degree in risk management. The MIA has continued to act as a catalyst in building an educational pipeline from high school through graduate schools to assure a well prepared, educated work force across the insurance sector. To that, I hope to add an emphasis on degrees and opportunities in the technological and data sciences. I see Maryland as the East Coast leader in this area.

The MIA held virtual industry meetings with producers earlier this year. What were your key takeaways?

The Maryland Insurance Administration strongly believes that communication is key to effective regulation and customer service. Throughout the COVID-19 emergency, we’ve stayed in close touch with insurers, providers, and producers to make sure their needs and concerns are being addressed. For producers, an important issue has been continuing education and licensing, and I am happy that we were able to move seamlessly to a new vendor – Prometric – effective Oct. 1 for testing services. Most significantly, for the first time, Maryland insurance licensees can take their exams online.

The Maryland General Assembly in past sessions has considered proposals to impose a fiduciary standard on the conduct of licensed insurance producers. In addition, there is an NAIC model regulation, based upon the SEC “Best Interest” regulation, which may be considered for adoption in Maryland. What are your thoughts on these proposals?

The Maryland Insurance Administration testified against the 2019 fiduciary standard bill. There were several reasons for that. With respect to the standard of conduct, the MIA considered the statute to be overly broad. In addition, the legislation could have subjected insurance producers to dual oversight by both the MIA and the Office of the Attorney General, an unnecessary redundancy given that a significant purpose of the MIA is to oversee producers. I agree with those positions. There are circumstances in which insurance producers assume fiduciary roles with respect to their clients, but that is not necessarily the case with respect to every sale and interaction, particularly when purchases are made electronically through wholly digital experiences. It is critically important that producers be educated and informed, and that consumers are protected throughout the sales transactions through, for example, disclosures and mandated offerings. But broadly treating every producer as a fiduciary of every insurance purchaser for every transaction, in my mind, goes too far.

Maryland case law does an excellent job of identifying the circumstances in which a fiduciary relationship is established, and the General Assembly has done an excellent job of imposing affirmative obligations on producers with respect to their conduct. The confluence of the two create significant consumer protections, and the MIA rigorously enforces those standards.

With respect to the NAIC Model and the SEC’s Best Interest Standards, this approach is an effort to be more intentional in identifying circumstances in which it is appropriate to impose a heightened set of obligations on producers selling financial service products. Maryland is reviewing the NAIC model approach and will adopt a form of it. My staff is currently working through a draft, and we expect that we will post a draft for comment by the end of the year.

The COVID-19 pandemic has raised issues around business interruption coverage, and multiple state legislatures have introduced bills that would require insurers to cover COVID-19 related claims. What is your opinion on this topic?

While multiple state legislatures looked at coverage legislation very early on in the pandemic, no state passed legislation that would mandate coverage for COVID-19 business interruption coverage claims without regard to policy language. While initial concerns were understandable, legislators quickly recognized the constitutional challenges of any such approach, as well as the financial impact of such an approach on the solvency of the insurance industry, which could not absorb these losses.

The NAIC, of which Maryland is a member, has provided context and impact information on this topic, and the MIA has likewise provided the Maryland General Assembly with an understanding of the dollar volume of these types of claims, the fact that premium was not collected to respond to these claims, and the economic impact such claims would have on the industry as a whole.

With respect to any specific forward-looking concepts, the MIA will continue to be an information resource in Annapolis if any business interruption insurance bills are introduced. As always, we are available to all stakeholders for pre-session review of any proposed legislation involving any insurance matter.

What is your main priority to accomplish while serving as commissioner?

First and foremost, I plan to keep us moving in the right direction. We have a very experienced, talented, and knowledgeable team, and we will continue to expand our market.

In addition to technological innovation, I also have a significant interest in mental and behavioral health resources and parity – the availability and affordability of care. With respect to insurance, that is includes a discussion on network adequacy. It broke my heart to leave the University of Maryland Medical Systems Board to accept this appointment, but the balm for that was joining the Board of the Maryland Health Benefit Exchange and being a member of the Governor’s Commission to Study Mental and Behavioral Health in Maryland.

I am also actively engaged in two important workstreams at the NAIC. I am the vice chair of the financial solvency workstream of the new NAIC Climate and Resiliency Task Force, which will focus on the economic impact of climate on insurers. And, I am on the Property and Casualty and the Life and Annuity workstreams on the NAIC Special Committee on Race and Insurance. Both of those workstreams include careful consideration of product design; access to product, including affordability; and the impact/use of predictive analytics, big data, and machine learning.