• Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Contact Us
  • Sponsor An Email
  • Post A Job
  • Merger & Acquisition Services

Agency Checklists

Massachusetts Insurance News & Job Opportunities

You are here: Home / Insurance News | Massachusetts / DOI News | Massachusetts Division of Insurance / Why Massachusetts Still Ranks As One of the Worst States For Insurance Regulation

Why Massachusetts Still Ranks As One of the Worst States For Insurance Regulation

January 13, 2017 by AC Editor

The annual Insurance Regulation Report Card is now in its fifth edition

[pullquote]We commend the department for running a lean budget, but it remains the case that Massachusetts is a very expensive state in which to do business – R.J. Lehmann[/pullquote]
The insurance marketplace continues to be one of the largest and most significant segments of the financial services industry sectors that is still almost entirely regulated at the state level. Since 2012, the R Street Institute, a non-profit, non-partisan public policy research organization, has taken on the job of examining each of the 50 states to determine which ones do the best job in regulating the “business of insurance.” The results then are published in R Street’s annual Insurance Regulation Report Card.

Now in its fifth edition, the Insurance Regulation Report Card “grades” each state, via seven different dimensions, to determine how effective and efficient each state is in the discharge of their duties with respect to insurance.

The underlying belief behind the Insurance Regulation Report Card,  is to determine which state regulatory systems best embody the principles of a limited and efficient government. As R Street Senior Fellow, Editor-in-Chief and Co-Founder, R.J. Lehmann, states:

“We believe states should regulate only those market activities where government is best-positioned to act; that they should do so competently and with measurable results; and that their activities should lay the minimum possible financial burden on policyholders, companies and, ultimately, taxpayers.”

Mr. Lehmann cautions, however, in this edition, as he has cautioned in past editions, the report card should not be seen as an indictment against certain states or their commissioners:

“…The organization emphasizes that the report is not intended as a referendum on a specific regulator but rather “… our best attempt at an objective evaluation of the regulatory environments in each of the 50 states.”

To achieve that goal, the R Street Institute asks the following three basic questions in analyzing a state’s regulation of its insurance industry:

  1. How free are consumers to choose the insurance products they want?
  2. How free are insurers to provide the insurance products consumers want?
  3. How effectively are states discharging their duties to monitor insurer solvency, police fraud and consumer abuse and foster competitive, private insurance markets?

Massachusetts falls back to the bottom of the barrel this year

While our neighbor to the North, Vermont, once again received top marks in 2016, Massachusetts actually got a worse grade in 2016 than it did for 2015. In 2013, the Commonwealth received a “C-“, then dropped to a “D” in 2014, but rallied in 2015, when the Bay State’s grade improved to a solid “C”. The improvement was short-lived, however, as Massachusetts barely earned a passing grade this year with a “D-“.

Agency Checklists, MA Insurance News, Mass. Insurance News
Graph courtesy of the R Street Institute

As noted in a screenshot of Massachusetts’ 2016 Report Card, while R Street highlighted the state’s competitive home insurance market as a strength, the Commonwealth was marked down for various factors including large auto and homeowner’s residual markets and little underwriting freedom.

More about the R Street’s Massachusetts Grade

As anyone who has gone to school would agree, it is sometimes hard to know why you are given a certain grade, but the best way to improve is often to ask why you were graded the way you were.

To that end, we queried Mr. Lehmann on his views as to why Massachusetts garnered such a low grade for its overall performance. Here is what he wrote us:

The area where the state continues to be the greatest outlier is in the ratio of the regulatory fees it charges to insurance companies and insurance agents, compared to the amount it actually spends on regulation.

In 2015, Massachusetts Insurance Department $14.1 million on regulating the business of insurance, but it collected more than eight times that amount, $130.7 million, in regulatory fees and assessments from the insurance industry. That does not include the $325,421 in fines and penalties insurance companies paid the state, much less the $362.16 million in premium taxes that were paid by insurance consumers.

We commend the department for running a lean budget, but it remains the case that Massachusetts is a very expensive state in which to do business. Bringing down these fees to make them at least roughly resemble the actual cost of regulation would encourage more firms to begin writing business and reduce the impact of this stealth tax on the cost of insurance.

The other major area of concern is the lack of underwriting freedom in the state and how that serves to create relatively large residual markets. The “managed competition” initiative has made great strides in shrinking the size of Commonwealth Automobile Reinsurers, which now accounts for just 1.4 percent of the market, when it was as high as 70 percent 30 years ago. It should be noted, however, that it remains the third largest residual auto insurance market in the country, behind only North Carolina and Rhode Island.

There’s also been some progress on the property insurance side, where the Massachusetts Property Insurance Underwriting Association has declined from about 7.3 percent of the market in 2011 to 6.5 percent of the market as of 2015. But because most other residual property insurance markets have been shrinking much faster in the prevailing soft property insurance cycle, the MPIUA is now the single largest residual property entity in the United States, larger even than Florida Citizens.

Governor Charlie Baker and Insurance Commissioner Daniel Judson have made clear that they are interested in removing burdensome regulations that hinder the Massachusetts economy. If they could find ways to reduce excess regulatory fees and extend more underwriting freedom, we expect the state could improve its report card score drastically.

The Top 10 best states for insurance regulation according to R Street

With those thoughts in mind, here are the ten states this year that R Street says are doing it right:

  • Vermont  “A+”

  • Utah  “A”

  • Maine  “A”

  • Illinois  “A”

  • Idaho “A”

  • Arizona “A”

  • Wisconsin “A-“

  • New Hampshire “A-“

  • Kentucky “A-“

  • Nevada “B+”

And the top ten who make up the other end of the list…

On the other end of the list, these ten states were given the lowest marks for their regulation of insurance. While Massachusetts is not the worst, it’s close.

  • New York “D”

  • North Dakota “D+”

  • Montana “D”

  • Delaware “D”

  • Mississippi “D”

  • Louisiana “D”

  • Hawaii “D”

  • California “D”

  • Massachusetts “D-“

  • Arkansas “D-“

  • North Carolina “F”

For those interested in taking a look at the official report, a copy can be accessed by clicking the link below:

View the R Street’s 2016 Insurance Regulation Report Card here

Print Friendly, PDF & Email

Filed Under: DOI News | Massachusetts Division of Insurance Tagged With: DOI news, MA DOI news, mass insurance news, Mass. Insurance News

Primary Sidebar

Sponsored

Sponsored

DOI Announcements

Latest Agency Sales

Accretive Announces Acquisition of Platinum Worksite Benefits

Agency Checklists, MA Insurance Jobs, Hub International, MA Insurance News, Mass. Insurance News, MA Insurance Jobs

Hub Expands Stop Loss Services With Mass-based Stop Loss Insurance Brokers

Massagent insurance aquisitions, Hilb Group

The Hilb Group Acquires King & Cushman

Alera Group Expands Into Vermont with Acquisition of Noyle Johnson Group

More Agency Sales

Career News

Corvus Insurance Names Madhu Tadikonda as New CEO to Lead Accelerated InsurTech Growth and Global Expansion

Alexander & Schmidt Names John Natale Its New Chief Executive Officer

Agency Checklists, MA Insurance News, Mass. Insurance News, Liberty Mutual, Liberty Mutual Life Assurance Co of Boston, top insurers in Massachusetts, largest Mass. P&C insurance carriers,

Liberty Mutual Insurance Appoints Two New Underwriting Leaders to Global Risk Solutions to Better Serve Commercial Customers

Plymouth Rock Appoints New Chief Operating Officer

Insurance Executive Hires Leading Renaissance Alliance

Renaissance Alliance Promotes Insurance Industry Leader Bob Bondi as CEO

In Memoriam

In Memoriam: William J. “Bill” Waldron, 1929-2022

In Memoriam: Christine Anastasi, 1951-2022

In Memoriam: Christine Anastasi, 1951-2022

In Memoriam: Joan D. Small, 1928-2022

In Memoriam: Joan D. Small, 1928-2022

CAR News

4th Look: The Private Passenger Auto Insurance Marketplace in Massachusetts

Eastern Insurance Group LLC Acquires Operating Assets of John T. Burns Insurance Agency, Inc.

Two Governing Committee Seats Freed Up For Independent Agents At CAR

Right to Repair Group Files Amicus Brief & Urges Prompt Ruling on Ballot Question After 1 Year Delay

View More CAR News

Massachusetts Law Updates

New Rule Would Make Insurers Pay Insured For Preventing An Insured Loss

New Rule Would Make Insurers Pay Insured For Preventing An Insured Loss

A formal request by Federal Appeals Court to the SJC to decide if insurers owe costs to prevent a covered loss.

Front view of the Quincy Mass. Masonic Temple with Roman Columns

Confused Voicemail Leads to E&O and Coverage Suits

SJC Construed For 1st Time Meaning of “Doing Business As” In Relation to CGL Coverage.

5 Points On New Ruling: Unreasonable Storage Reduces ACV Payment

A short opinion with a disproportionate impact on first-party property damage total loss claims.

Agency Checklist article on COVID-19 Closings in Massachusetts

First State High-Court COVID-19 Decision On Business Interruption Claims

Dismissed by Superior Court, the restaurants took their appeal directly to the SJC.

More Mass. Law Updates

DOI News

The 2022 Home Insurance Report Part III | Policy Numbers by Massachusetts County

The 2022 MA Home Insurance Report Part II | MA FAIR Plan Review

The 2022 MA Home Insurance Report | Part I

Mass. Business Entity License Renewals on Hold

View More DOI News

Insurance Fraud

Agency President Sentenced for Embezzling $300,000 In Insurance Premiums

Quinn Group Ins. Owner’s Trial to Begin on Federal Benefit and Social Security Fraud Today

First Guilty Plea in No-Fault PIP Auto Insurance Fraud Scheme

GM Financial Will Pay Over $1.8 Million For GAP Coverage Refunds and Loan Violations

More Insurance Fraud News

Footer

Agency Checklists

About us
Contact us

14 Summer Street
Suite 102
Malden, MA 02148
617-598-3800

Advertise on Agency Checklists

We offer a variety of ways to get help promote your company or product.

Announcements
Email Sponsorships
Partnerships
Custom Collaborations

*Affiliate Disclosure

Please note that any of Agency Checklists’ articles might contain one or more affiliate links. This means that any subsequent purchase resulting from these links may result in a commission for us, but at no additional cost to you. For example, as an Amazon Associate, Agency Checklists earns a commission from all qualifying purchases. By working with affiliates we can continue to keep Agency Checklists subscription free. Thank you for your support.

SEARCH OUR SITE

Explore Our Archives

Copyright © 2022 · Agency Checklists · All rights reserved.

 

Loading Comments...