A December report by research firm R Street evaluated the climate of insurance regulation across American states, with respect to politicization and fiscal efficiency among others.
Southern states got a generally low score with the exception of Texas, which got a perfect 10 out of a possible 10. In comparison, Oklahoma got a 2.1 rate, with Louisiana on its heels with its 2.9 score. Arkansas got a 5.7 grade, taking up a middle position.
“Insurance regulators are public servants, and thus it is necessary and valuable for the public to have oversight of their activities. But such oversight is properly exercised through the executive, legislative and judicial branches. Trained, professional regulators can much more effectively enforce the law, unbidden by the shifting winds of political passions,” author RJ Lehmann explained in the report.
He went on to say, “for this reason, we downgrade those states where insurance regulation is explicitly a political matter, and acknowledge the wisdom of republican structures that properly insulate insurance regulators from the fickle winds of politics.”
Meanwhile, the report also evaluated the fiscal efficiency of these states. Arkansas outperformed Texas with a 10.7 score. The latter was given a 10.5 grade. Oklahoma came in with a 9.9 score, and Louisiana lagged behind with 8. The highest possible score is 15.
Lehmann explained, “It’s important that state insurance regulators not only do their jobs well, but that they perform them efficiently, with minimal cost to consumers, companies and taxpayers. Taxes and fees paid to support insurance regulation are passed on as part of the cost of insurance coverage.”
“Based on the NAIC’s Insurance Department Resources Report, the 50 states, Puerto Rico and the District of Columbia spent $1.41 billion on insurance regulation in 2015, up from $1.33 billion a year earlier,” the report noted.
“But it’s also important to note that state insurance departments collected more than double that amount, roughly $2.92 billion, in regulatory fees and assessments from the insurance industry. State insurance departments also collected $224.0 million in fines and penalties and another $1.18 billion in miscellaneous revenues. States separately collected $18.32 billion in insurance premium taxes.
“Altogether, of the $22.65 billion states collected from the insurance industry last year, only 6.2% was spent on insurance regulation.”
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