Monday, February 15, 2010

Regulations and deregulations in insurance market

The world is a complicated place and, more often than not, it does not work well unless the right people hold the key positions. When it comes to insurance, you might think the key people are the legislators who sit on the relevant consumer or finance committees. In reality, the key person is always the Commissioner who heads the state's Department of Insurance. Every state has such a person and the department is responsible for regulating the insurance market in the state. It licenses companies to write policies and, where appropriate, sets the terms for the conduct of business. This is where the role gets political because some commissioners see their role as being protective of the insurance companies, while other aim for consumer protection. The difference in political attitude shows up most clearly in the complaints process operated in each state. If a complaint is found valid after an investigation, the commissioner has sweeping powers to order the insurer to correct the situation. So the first sign comes in the number of complaints held valid. Then comes the pattern of responses in promoting fair trade practices. Finally, there is the degree of publicity given to the results. Some commissioners publish annual reports. The best name and shame the companies, showing how many complaints have been upheld against each. Others simply give overall statistics without naming the companies. If you live in one of the best states, you can get detailed help on identifying the safest insurers with whom to do business. It is never enough just to get online quotes. Always get some background on the main companies writing policies in your state.

This makes it all the more sad that one of the best of the current commissioners is going to step down and move into a university post. This is Nonnie Burnes, a former Superior Court justice, who has been the commissioner in Massachusetts during a critical two-year period of time. It was her role to implement the state's move to a competitive market for car insurance. This has seen a managed expansion from nineteen to thirty companies giving car insurance quotes and writing policies. She was also a pivotal figure in the debate over the rates for homeowner policies, particularly those applying to coastal areas more prone to storm damage and flooding. She imposed a full ban on the use of factors including the driver's occupation and education level, credit scores, etc., instructing the insurers to focus on the safety record of each driver and their level of experience as the basis for fixing the premium rate. Now, if a university professor lives next door to an electrician, they both pay the same rate if their driving records are broadly similar.

Massachusetts is going to lose a person who has, for the most part, championed the rights of the consumer. Indeed, there is fear that unless the state legislature writes some of her regulations into law, the incoming commissioner may undo some of her good work. You should take a direct interest in your state's department of insurance. If you are lucky, it will be a strong defender of your rights. Even if the commissioner is pro-insurer, there will still be many employed on the enforcement side who will investigate complaints thoroughly and push the companies to play fair on your policy.



© 2010 Ranjan Kumar

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commercial property insurance said...

Besides all these regulations scams and fraud do happens. I am not denying the fact that these are useless but also their absence will make the situation more worse. There should exist a governing body that controls the insurance market. Also people have to become careful too and choose the carrier after knowing all about it.

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