Roughly three-quarters U.S. residents live in states where insurance departments do not receive adequate funding to properly oversee the insurance industry, according to a recent survey by the Consumer Federation of America.
According to the survey, consumers in Arizona, Georgia, Indiana, Nevada, South Dakota, Tennessee and Utah receive the least adequate supervision of insurance companies for their tax dollars. The study also showed that, while there has been some improvement in state insurance department budgets, periodic examinations of insurance companies, consumer education programs and state hiring of actuaries, there is still room for improvement. In a letter sent Thursday, the Consumer Federation of America urged state governors to take the issue seriously. The Consumer Federation is led by J. Robert Hunter, a vocal consumer advocate and former Insurance Commissioner of Texas.
Meanwhile, George Nichols III, president of the National Association of Insurance Commissioners, is apparently encouraged by what he sees as some positive trends. “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,” Nichols was reported by the Associated Press as telling Hunter in a letter.
The survey found that The District of Columbia, Florida, Louisiana, Maine, Massachusetts, New York, Oregon and Wyomingrepresenting 17 percent of the populationhad the best funded insurance departments. Alaska, Delaware, Illinois, Nebraska, New Jersey, the U.S. Virgin Islands and Vermont, representing 9 percent of the population, also met the survey’s minimum funding standard.
To meet that standard, a state’s insurance department budget must equal at least 10 percent of the tax revenues collected by the state from insurance premiums paid by residents. The national average for the percentage of premium tax revenue spent on state regulation is 7.7 percent, according to the survey, up from 5.4 percent in 1988.
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