Georgia’s Insurance and Safety Fire Commissioner, John King, recently informed state lawmakers about his office’s authority to review agreements between insurers, their affiliates, and holding companies. This announcement came in response to a request from State Senator Nabilah Islam Parkes, who was seeking clarity on the relationships between insurers and their affiliates, including managing general agents (MGAs).
King’s remarks highlighted concerns similar to those raised in a recent report from Florida’s Office of Insurance Regulation. That report found that some insurance companies had fee structures that were not “fair and reasonable.” This has prompted lawmakers in Florida to investigate why property and casualty (P&C) insurers reported losses while their affiliates made substantial profits.
In the U.S., P&C insurers often use affiliate structures that include various subsidiaries. These arrangements are intended to spread risk, enhance tax strategies, and comply with different state laws. However, consumer advocates worry that these structures might allow insurers to take advantage of varying regulations, leading to reduced oversight and possible exploitation of consumers.
One notable case involves State Farm’s restructuring of its California subsidiary. Critics argue that this separation could be used to misrepresent the subsidiary’s financial health, potentially justifying higher rates, even when the parent company remains financially stable. Despite these concerns, California regulators recently approved a 22% average increase in home insurance premiums for State Farm, albeit with certain conditions.
In Georgia, King emphasized that state law permits the Department of Insurance to evaluate and approve agreements between local insurers and their affiliates on a case-by-case basis. This process is designed to ensure that compensation arrangements are fair. He also pointed out that no insurer in Georgia can distribute large dividends to shareholders without his approval. Furthermore, insurers must inform the department within 30 days if an MGA agreement starts or ends.
King reassured lawmakers that his department has the authority to examine the records of licensed insurance entities whenever necessary to protect consumers in Georgia. This proactive approach aims to ensure transparency and fairness in the insurance market.