Audit of the Division of Insurance

This is a state performance audit of the Massachusetts Division of Insurance covering July 1, 2016 through June 30, 2018.

“In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of the Division of Insurance (DOI) for the period July 1, 2016 through June 30, 2018.”

Auditors checked whether the agency handled its insurance-company assessments correctly and whether it properly reviewed insurers’ market behavior.

“In this performance audit, we reviewed how DOI administered its operations assessment process and its market conduct analysis of Massachusetts licensed insurers.”

The Division of Insurance oversees insurers and helps enforce insurance laws, so mistakes in how it funds its operations affect regulated companies and public accountability.

“We also investigate and enforce state laws and regulations pertaining to insurance and respond to consumer inquiries and complaints.”

For ordinary residents, the point is that insurance oversight should be funded fairly and the agency should keep watch on companies that may pose risks to consumers.

“Market conduct analysis allows DOI to identify insurers that warrant further inspection or, in some cases, regulatory action.”

The market conduct review passed, but the billing process did not: some insurers were excluded from operations assessments even though they should have been included.

“In fiscal years 2014 through 2018, the Division of Insurance (DOI) did not bill 62 out of a total of 5,816 insurers for $857,306 in annual operations assessments even though the insurers were required to pay them.”

The auditor recommended that DOI stop exempting those insurers and look at whether overbilled insurers should get money back.

“DOI should work with insurers that were overbilled for operations assessments to determine whether any restitution is necessary.”

The key significance is fairness: when some insurers were left out, the cost was shifted to the insurers that did get billed.

“By not doing this, DOI clearly overbilled the insurers that did receive annual operations assessments in an amount equal to what it should have billed to the insurers it should not have excluded.”

An operations assessment is a charge to insurers that helps reimburse the state for running the Division of Insurance.

“Assessments under this section shall be charged to the normal operating cost of each company.”