AAI Pleased with Mont. State Fund’s Withdrawal of Mutualization Bill

July 17, 2002

The Alliance of American Insurers expressed satisfaction with the decision by the Montana State Fund to postpone introduction of a bill that would have transformed the fund into a mutual insurance company in a format that lacked direct regulatory oversight, yet included the new company in the state guaranty fund. The bill had been scheduled for introduction during a special, two-week legislative session next month.

“The Alliance talked during the last week with legislators, the governor’s office, the insurance commissioner and other Montana workers compensation stakeholders about our concerns with the state fund’s proposal, and found that they shared our concerns about the format of the state fund’s conversion to a mutual insurer,” Larry Kibbee, vice president of the Alliance’s Northwest Region, said. “As originally proposed, the new company’s special operating characteristics would enable it to be an anti-competitive force in the state’s marketplace.”

Alliance analysis of the Fund’s proposal indicated it would gain significant competitive advantage over private insurers doing business in the state through retaining federal tax-exempt status and reducing financial oversight by the insurance commissioner, while still being backed by the state’s Property and Casualty Insurance Guaranty Fund.

“We have said from the outset that we would not oppose the creation of a mutual insurance company that operates under the same direct regulatory rules and other marketplace considerations as Alliance-member companies,” Kibbee said. “Between now and the regular legislative session in Jan. 2003, we will work with all workers compensation interests in Montana, including the State Fund, to see if there is a way to modify the Fund’s legislative proposal to make it acceptable.”

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