The industry is putting far more into state government through premium taxes and other revenues than it is getting back in well-funded departments. Frankly, it's a black eye on the face of those of us who are states' rights advocates. The reason, Elliott said, is that without efficient and modern regulatory tools, support for state regulation will erode over time. But former NAIC President David Walsh, now general counsel of the domestic brokerage group at New York-based American International Group Inc., sees things differently. Walsh said insurers have long accepted the trade-off of paying premium taxes instead of income taxes.
Insurance companies pay fees for specific functions that the departments carry out.
Fees should fund the budget needs of the departments. The 10 states with the biggest department budgets New York, California, Florida, Texas, New Jersey, North Carolina, Illinois, Louisiana, Ohio and Pennsylvania rely primarily on fees and assessments. Only Pennsylvania allocates a majority of its insurance department budget from the state general fund. If certain people who control the state purse strings do not fully appreciate the problems involved in insurance regulation, the issue of whether departments are getting a sufficient allocation is going to become more important.