New York’s new governor wants to merge the state’s banking and insurance departments, arguing that the streamlining would save money and prevent activity from “falling between the cracks of our regulatory agencies.”

Ellen Melchionni

Gov. Andrew Cuomo made the proposal during his first State of the State speech. The state’s former attorney general took office Jan. 1.

“The division between insurance and banking and consumer protection don’t exist in the marketplace,” Cuomo said, “and much of the activity is falling between the cracks of our regulatory agencies.”

The proposal, if approved, would create the Department of Financial Regulation.

Cuomo included the proposal in his plan to help combat the $10 billion deficit in the state’s $136 billion budget.

The New York Insurance Association (NYIA), representing property-casualty insurance interests in the state, said it supports Cuomo’s idea.

“We applaud Governor Cuomo for his efforts to reduce state spending,” Ellen Melchionni, NYIA president, said in a statement. “Since the insurance and banking departments are funded by the respective industries these entities regulate, we look forward to a reduction in the assessments levied on New York businesses.”

The New York State Insurance Department is funded by 332 assessments paid by domestic insurance companies.

Assessments on domestic insurers have “nearly doubled” and the sub-allocations, where money is shifted from insurance department funding to other agencies for programs unrelated to insurance, have nearly tripled since 2008, Melchionni said.

A NYIA suit against the practice, filed last year, is pending.

The association noted that the insurance industry is a vital component of New York’s economy, employing more than 185,000 New Yorkers. The industry contributed $32.4 billion to the gross state product (GSP) in 2007, accounting for 3.4% of the state GSP.