The 2012 Regulatory Report Card is the first for the R Street Institute which was founded by former employees of the Heartland Institute
Last week, the R Street Institute published its Regulatory Report Card for 2012, which as the Institute explains is “A state-by-state study of the U.S. regulatory system, examining which states are doing the best job of regulating insurance through limited, effective and efficient government.”
While Massachusetts did better than last year, it still received a letter grade of “D” – a far cry from other New England states, like number-one ranked Vermont. To find out more about why Massachusetts did so poorly in this ranking, we sent a couple of questions to R. J. Lehmann, the public affairs director and co-founder of the R Street Institute and the author of the 2012 Regulatory report card. Here are the answers he sent us:
Massachusetts has improved half a grade this year, what in your opinion were the determining factors?
Reforms to the Massachusetts auto insurance market continued to show modest improvements, both in the gradual decline of the size of the residual auto insurance market and in seeing a less concentrated market overall. But probably what helped Massachusetts the most is that this year’s report — the first to be produced by the R Street Institute — included five new rating factors. The measurement of states’ investment in policing insurance fraud particularly benefitted the Commonwealth, which has a separate criminal fraud bureau, gives fraud investigators peace powers and does not limit what kinds of fraud they can investigate.
What aspect of the regulatory climate in the Commonwealth worries you the most?
Massachusetts continues to have significant rating and underwriting controls, including prohibitions against the use of credit information. We’re also very concerned about what we call the “regulatory surplus” collected by Massachusetts. In 2010, insurance companies and agents paid $120.6 million in fees and assessments to the Commonwealth, but only $12.7 million was spent on insurance regulation. No other state had that sort of disparity. Nearly 90 percent of the regulatory fees collected amount to a hidden tax on insurance consumers.
In your opinion, what are the most promising regulatory developments in the Massachusetts insurance marketplace?
Clearly, the most promising regulatory development continues to be the auto insurance market reforms. We would also point to the Massachusetts FAIR Plan being something of a pioneer in using catastrophe bonds to finance their reinsurance program, which has since been copied in North Carolina, Louisiana and Florida.
Do you see Massachusetts trending upwards, downwards or treading water when it comes to regulating insurance?
It’s on its way upward, although the regulatory surplus issue is one that may continue to weigh it down, just based on how much of an outlier Massachusetts is in that area. We think regulatory fees should roughly match regulatory spending, and that it is not appropriate for insurance consumers to be called on to patch other holes in state budgets.
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Other articles from Agency Checklists that you might be interested in….
Massachusetts Receives A “D” on Annual Insurance Regulatory Report Card
Why We Still Get a “D-” on the 2011 Property Casualty Insurance Report Card
