What Insurance Commissioners Do

By Author: Marcus Stalder
Total Articles: 491
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Every state in the Union has an Insurance Commissioner. They are executive officers and, in some cases, also members of the cabinet. At a national level they are represented by the NAIC which is supposed to harmonize the way the different Commissioners act. As it stands, there are quite significant differences between the different states. But because this is driven by the polarized political landscape, the NAIC is less useful than it should be. It was set up to produce model laws and regulations that could be adopted by states, co-ordinating policies to regulate the insurance industry. Unfortunately, state legislatures prefer to make their own laws and resist the idea of any federal policies. This means something of a lottery in the usefulness of Commissioners. If you are lucky, you live in a Democrat state where the general policy approach is to protect the consumer against exploitation by the insurers. If you live in a Republican state, there's a belief in the power of the free market and so minimum regulation.

So why should you look at what your local Commissioner is doing? The answer falls into two areas. First, ...
... the Commissioner sets the tone for competition in the state. In a regulated market, the Commissioner will intervene when he or she thinks it necessary, aiming to encourage the local insurers to compete against each other for your business. If this happens, the quality of the policies will improve and the premium rates charged will reduce. This benefits you. In an unregulated market, the state is essentially hands off. There's no general will to interfere unless there's very clear evidence of agreements to fix premium rates or rig the market in some way. The number of RICO actions against insurers is rising where profits are raised by unlawful means. But the actions are largely restricted to Democrat states.

Second, the Commissioners have a general brief to help you. This comes in two forms. There's supposed to be expert guidance available to help you find insurance, and all the states operate a complaints process designed to give you remedies if you can prove you have suffered loss. In reality, the advice side is always less helpful because they are not in the business of acting as sales agents for any insurance company. The advice is always very general. The complaints side is more useful because it can give you a quicker remedy than having to fight your way through the courts. In the best states, the results of the investigations into the practices of the insurance companies are published, showing how many complaints were made against each company and how many were upheld. In the worst states, no information is published and you have no guidance on the reliability of local insurers when you get the auto insurance quotes and start trying to decide which represent good value for money.

It's always easier to find the best deal when you have access to detailed information about all the insurers giving you a quote. If you know some companies have a poor track record, with multiple complaints upheld, you can take your business elsewhere. So, when looking for new car insurance, check out your state's Department or Office of Insurance website. You could find some very useful information.