The Courant closed out 2007 with an ode to Connecticut Department of Insurance market conduct exams, the results of which are now being posted on the CT DOI’s website.
The paper has followed up with an op-ed, which observes:
Consumers no doubt appreciate the refunds that result from the work of the insurance department’s investigators. Still, these fines (which are based on state law) are paltry next to the multibillion-dollar scale of these companies. Or, for that matter, the fines levied in other states: Insurance regulators in New York, for example, issue fines that are often two, even three times bigger.
The deterrent effect of Connecticut’s relatively small fines is further called into question by the fact that some insurers have been making the same mistakes — and getting penalized — repeatedly for the past two decades.
Connecticut’s insurance commissioner, Thomas R. Sullivan, who took over at the agency last spring, says his department will ask lawmakers this year to toughen those fines, giving them some needed teeth.
I hate to ask…but who does the Courant think will be ultimately paying those fines? True, some jurisdictions have filing requirements that attempt to prevent insurers from loading their rates with fines and other “unapproved” expenses.
However, at stock insurers, investors have an unfortunate habit of seeking a certain rate of return on their investments. If profit is being affected by fines, the organization will naturally tend to find additional profit (or limit capacity) accordingly.
Meanwhile, at mutual insurers, where the insureds are the owners of the company, fines that impact the company functionally impact the consumers (who own the carrier) .