Georgia Insurance Commissioner: Oversight in Place for Fair Insurance Compensation
Georgia Insurance and Safety Fire Commissioner John King has informed state lawmakers that his office possesses the authority to review agreements between insurers, their affiliates, and holding companies. This statement comes in response to inquiries from state Senator Nabilah Islam Parkes concerning insurer affiliates, subsidiaries, and managing general agents (MGAs).
This issue mirrors findings from a recent report by the Florida Office of Insurance Regulation, which found that some insurers’ fee structures were not “fair and reasonable.” That Florida report has spurred investigations into property and casualty (P&C) insurers, amid concerns that they were reporting net losses while their affiliates generated billions in profits.
Complex Affiliate Structures in P&C Insurance
P&C insurers in the United States often utilize intricate affiliate structures, encompassing various subsidiaries and affiliated entities. These structures aim to diversify risk, optimize tax strategies, and comply with state regulations. However, these practices have drawn criticism.
Consumer advocates express concern that insurers might exploit varying state regulations, minimizing oversight and capital requirements. A notable example is State Farm’s restructuring of its California subsidiary, which critics argued could be used to portray the subsidiary as financially distressed, potentially justifying rate increases, even though the parent company remained financially healthy. Regardless of State Farm’s financial status, California regulators allowed the insurance giant to raise home insurance premiums by an average of 22%, with certain conditions.
Review on a Case-by-Case Basis
King stated that Georgia law allows the Department of Insurance to review and approve agreements between domestic insurers and their affiliates and subsidiaries. These reviews are conducted on a case-by-case basis to assess the fairness and reasonableness of compensation structures.
The commissioner also noted that Georgia-domiciled insurers cannot distribute extraordinary dividends to shareholders without his approval. Furthermore, state law mandates that insurers notify the department within 30 days when an MGA agreement begins or ends. King emphasized that the department retains the authority to examine licensed entities’ books and records and exercises that authority when necessary to protect Georgia consumers.
