August 12, 2010

New Missouri law helps consumers when insurance companies face financial problems

State regulators can intervene, protect policyholders

Jefferson City, Mo. - Financially strapped insurance companies in Missouri will soon face tighter oversight, thanks to a new law signed by Gov. Jay Nixon. Senate Bill 583, which takes effect Aug. 28, spells out the specific standards the Department of Insurance will use to determine when an insurer is in a hazardous financial condition. That means the company could be in danger of not having enough money to pay claims filed by consumers.

"We've long had the ability to intervene when a company is insolvent," said John M. Huff, director of the Missouri Department of Insurance. "But to protect policyholders, we need to step in much sooner than that. This new law lets insurers know exactly what we'll be looking at and when that intervention will occur."

Huff says at his department, consumer protection begins with solvency oversight. Because regulators require insurers to have adequate amounts of assets, consumers can feel more confident that when they file insurance claims, they will be paid.

The requirements of SB 583 will serve as an early warning tool for the Department of Insurance to identify companies at increased risk of insolvency and allow regulators to work with those insurers, creating action plans to make them more stable.

Huff says the new law may also affect future receiverships. When an insurer is in hazardous financial condition, the department goes to court to have the company put in receivership, which means the insurance director takes over the company. While the first attempt is always to rehabilitate the company, most receiverships end with liquidation and eventual closing of the company. Huff says earlier intervention gives regulators more tools to successfully rehabilitate companies.

The provisions of SB 583 are required for the department's accreditation with the National Association of Insurance Commissioners (NAIC). The accreditation program is one of the many strengths of state-based insurance regulation. Through this process, accredited state insurance departments take responsibility for the financial oversight of insurers based in their states.

Consumers with complaints or general questions about insurance can call the department's Insurance Consumer Hotline at 800-726-7390 or visit