R.I.’s Beacon Mutual Under Scrutiny As It Tries to Relax Regulation

February 7, 2006

Rhode Island’s dominant workers’ compensation carrier is facing an overdue audit and a probe into a whistle blower’s allegations as the state-created firm seeks to loosen the regulations governing it.

This week, Department of Business Regulation Director A. Michael Marques told The Providence Journal that state regulators are conducting a routine but overdue business practices audit of Beacon Mutual Insurance Co. The examination began this fall and is still ongoing, he said.

State law doesn’t stipulate how often state regulators are supposed to conduct business practice audits, but Marques said the examinations should be routine. He said Beacon Mutual hasn’t received such an audit since 1994.

“It’s really to see how you’re proceeding in the market you serve; are you fairly pricing your product?” Marques said.

Pricing is at the heart of allegations about Beacon Mutual made by an anonymous whistle blower. The allegations were made public last week by Gov. Don Carcieri, who’s trying to block legislation sought by the firm.

According to the governor’s report, an unnamed informer said Beacon Mutual granted certain companies preferential rates on workers’ compensation policies. One company that allegedly received a break, according to the informer, was Manpower Temporary Services, a firm owned by Sheldon Sollosy, who served as a paid chairman of the Beacon Mutual board for more than a decade.

Sollosy resigned from the Beacon Mutual board last Thursday, hours before Gov. Carcieri went public with the whistle blower’s allegations. Sollosy has denied any wrongdoing.

A draft report by auditors hired by Beacon Mutual said they found no evidence of wrongdoing by the firm or its employees.

A spokeswoman for Attorney General Patrick Lynch said his office is investigating the allegations.

Sen. Roger Badeau, D-Woonsocket, has introduced a bill that would allow Beacon Mutual to set up a wholly owned subsidiary to insure the out-of-state business ventures of Rhode Island companies. The bill would also reduce the number of board members appointed by the governor, and allow the House and Senate to each appoint one board member.

“There’s nothing wrong with the bill,” Badeau said. “They allege that this individual that was on the board did wrong. They haven’t proved anything.”

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