Press Release  Audit Reveals Unauthorized Billing Practices at Division of Insurance

Boston — In an audit released today, State Auditor Suzanne M. Bump calls on the Division of Insurance (DOI) to end an unauthorized practice that exempts some insurers from paying a required annual fee. This practice resulted in the remaining insurers being overbilled for this fee. State law directs DOI to assess an annual fee on all insurers operating in the Commonwealth to support the agency’s operating expenses. Under this law, DOI is empowered to collect up to $2 million annually through this fee. Bump’s audit found that from fiscal year 2014 to fiscal year 2018, DOI did not collect this assessment from 62 insurers and, as a result, overbilled the other insurance companies operating in the Commonwealth by $857,306.

In its response to the audit, DOI officials indicated the agency had a “maxed-out” policy, which the agency relied upon to exclude some insurers from paying the annual fee when they had already paid other insurer assessments in excess of what would be its annual operations assessment. However, the audit notes that DOI does not have the statutory authority to exempt insurance companies from paying the required operational assessment, and the “maxed-out” policy was not included in its policies and procedures. 

“As the Commonwealth’s chief insurance regulator, the Division of Insurance must act fairly and transparently in its assessments of insurers. By exempting some businesses from paying this fee, DOI has created an uneven playing field that forces some businesses to shoulder more than their fair share of this assessment,” Bump said of the audit. “The agency should put an end to this billing practice.”     

The audit recommends that DOI discontinue the practice of exempting some insurers from this assessment and that it work with companies that were overbilled to determine whether restitution is necessary. In its response, DOI said that it is taking steps to end this practice.

The audit also examined DOI’s administration of its market conduct analysis which examines how insurers interact with customers and policyholders to ensure that they are treated fairly and in accordance with contracts, state laws, and regulations. The audit found no deficiencies in this area.

Overseen by the Office of Consumer Affairs and Business Regulation, DOI is responsible for regulating and monitoring the Commonwealth’s insurance industry. Additionally, DOI provides the public with information regarding various types of insurance. During fiscal year 2018, DOI had 123 employees and received $13.3 million in state appropriations. As of April 2018, there were approximately 1,600 insurers licensed, authorized, or eligible to conduct business in the state.

The audit of the Division of Insurance is available here.

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