INSURANCE OVERSIGHT: State Commissions Underfunded
A new study found that three out of four Americans live in states that do not meet "minimum standards of funding to oversee the insurance industry," the AP/Baltimore Sun reports. Researchers at the Consumer Federation of America conducted similar studies in 1988, 1993, 1998 and this year. However, this year's survey differs from previous years due to "last November's enactment of sweeping legislation" that allowed for business interaction between banks, brokerage firms and insurance companies. For example, banks now can sell insurance policies. While there are federal regulators for the banking and brokerage industries, insurance companies are regulated solely by state commissioners with no federal supervision. According to the Consumer Federation, a state meets the minimum funding standards when its insurance department budget equals at least 10% of "tax revenues collected by the state from insurance premiums paid by residents." Thirteen states and the District of Columbia met the minimum standard. Massachusetts had the highest ranking at 16.9%, while Tennessee had the lowest at 2.1%. The national average was 7.7%, up from 5.4% in 1988. Reacting to the survey, George Nichols, president of the National Association of Insurance Commissioners, said, "States must immediately develop and implement measures to enhance their ability to jointly regulate an increasingly global industry, while maintaining the ability to react to local conditions and concerns." The survey also comes on the heels of allegations that insurance companies have engaged in discrimination against African Americans. Consumer Federation Director of Insurance J. Robert Hunter said that insurance commissions should have detected these cases of discrimination sooner and claimed that a lack of funding probably contributed to the slow reaction (9/1).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.