Insurance Regulators Have Accelerated Oversight, but Some Gaps Remain
GGD-00-42: Published: Dec 20, 1999. Publicly Released: Jan 11, 2000.
- Full Report:
Pursuant to a congressional request, GAO provided information on the readiness of the insurance industry to meet the year 2000 date change, focusing on: (1) an updated assessment, as of September 30, 1999, of state regulatory oversight of the insurance industry's year 2000 preparations; and (2) the status of the industry's year 2000 readiness.
GAO noted that: (1) since GAO's last report, the National Association of Insurance Commissioners (NAIC) stepped up its efforts to assess the insurance industry's year 2000 readiness by: (a) issuing expanded guidance to state insurance regulators on how to examine companies' preparedness; and (b) encouraging state regulators to conduct on-site examinations of insurers with the greatest potential public impact; (2) some of the nation's state regulators increased their use of examinations aimed at verifying the year 2000 readiness of their insurers, particularly for their nationally significant life/health and property/casualty insurers; (3) six of the 17 states reviewed indicated that their goal was to conduct year 2000 readiness examinations for all of the insurance companies domiciled in their states; (4) the remaining 11 states had set varying goals regarding which companies were to be subject to year 2000 examinations, but most of these states attempted to cover their nationally significant insurers; (5) in October 1999, NAIC's Year 2000 Industry Preparedness Task Force reported the insurance industry expected to experience little disruption when 2000 begins; (6) state responses to a nationwide survey GAO conducted indicated considerable confidence in the insurance industry's preparation for the year 2000 date change; (7) uncertainties about the ability of the remaining 5 percent of the companies to be year 2000 ready were largely unresolved at time of survey; (8) regulators indicated they did not have adequate information to determine the readiness status for 4 percent of the companies and considered 1 percent to be at risk of not being ready by December; (9) states appeared to have a slightly lower level of confidence in the readiness of health maintenance organizations and managed care organizations than those in other insurance segments; (10) according to a task force official, health insurers represent one part of the industry that remains vulnerable because they depend on hospitals and doctors' offices becoming year 2000 ready; (11) industry observers continued to express uncertainty over potential costs associated with year 2000-related liability exposures; (12) legal debates had yet to be resolved over insurance coverage for year 2000-related mishaps as well as liability for costs that policyholders incur to avoid such mishaps; and (13) rating companies indicated that it was still too early to tell how liability exposures might affect insurance companies, and for this reason, the rating companies had not factored these exposures into their ratings.