Formerly a part of The Heartland Institute, the R Street Institute publishes its inaugural “2012 Insurance Regulatory Report Card”
In one of its first acts as a new independent think tank, the R Street Institute has released its inaugural regulatory report card. The state-by-state analysis of the U.S. regulatory system measures states on 14 objective variables including regulatory clarity, fiscal efficiency, fraud and politicization. In addition, the report card asks three fundamental questions of each state:
- How free are consumers to choose the insurance products they want?
- How free are insurers to provide the insurance products consumers say they want?
- How effectively are states discharging their duties to monitor insurer solvency, police fraud, and foster competitive, private insurance markets?
R Street explains that the report is not intended as a referendum on specific state regulators. Rather, the report card is the organization’s is an objective attempt to evaluate the regulatory environment of each of the 50 states.
Scoring a “D” or “F” does not mean that a state’s insurance commissioner is inadequate, nor is scoring an
“A” an endorsement of those who run the insurance department.
With that being said, however, certain variables carry more weight than others in the examination. For example, while all states begin with a baseline of zero points, points are detracted from those states that employ stringent controls on rates and underwriting, or that demonstrate especially notable inefficiencies and ineffectiveness.
Massachusetts improves in this year’s report card, but not by much
Last year, the Heartland Institute’s report card gave Massachusetts a D-. This year, the R Street’s Report Card has again raised Massachusetts’ grade, albeit by a half. The following is how Massachusetts fared on the actual report card and in comparison to the other New England
|
State |
Letter Grade |
Total Points |
Financial Exams |
Run-offs |
Fraud |
Politic-ization |
Regulatory Clarity |
Tax Burden |
Regulatory Surplus |
Auto Market Share |
Home Market Share |
Residual Auto |
Residual Home |
Rate Controls |
Credit Scores |
Territorial Rating |
| Massachusetts |
D |
-23 |
0 |
0 |
3 |
-6 |
0 |
0 |
-10 |
-3 |
5 |
-4 |
-8 |
5 |
-5 |
0 |
| Vermont |
A+ |
28 |
0 |
2 |
-1 |
0 |
5 |
5 |
-2 |
5 |
5 |
-1 |
0 |
10 |
0 |
0 |
| New Hampshire |
B |
2 |
0 |
-4 |
3 |
0 |
0 |
-1 |
-1 |
5 |
5 |
0 |
0 |
0 |
0 |
-5 |
| Maine |
A |
10 |
-3 |
5 |
-2 |
-2 |
0 |
-3 |
0 |
5 |
5 |
0 |
0 |
5 |
0 |
0 |
| Rhode Island |
C |
-5 |
-3 |
-2 |
1 |
0 |
0 |
-2 |
0 |
3 |
5 |
-3 |
-4 |
0 |
0 |
0 |
| Connecticut |
C |
-4 |
0 |
-1 |
1 |
0 |
-5 |
4 |
-1 |
3 |
5 |
0 |
0 |
-5 |
0 |
-5 |
Highlights from the Report Card
The institute did not look favorably upon the Massachusetts Legislature’s recent decision to ban credit scoring and in response took –5 off each of the four states with active credit scoring bans. Alongside Massachusetts, they include California, Hawaii and Maryland (only in homeowner’s insurance).
In addition, Massachusetts was also deducted 10 points for its regulatory surplus. In its report it highlighted that fact by stating, “Massachusetts, whose regulatory surplus was nearly 10 times the insurance department budget, was assigned –10 points.”
In comparison, the report card gave Vermont top marks in the country, claiming it has the best property and casualty insurance regulatory environment in the country. Vermont scored 28 out of a maximum 55 points with small deductions for the relative size of its regulatory surplus, its lack of antifraud enforcement and for the size of its residual automobile insurance market.
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