85-15 AND Fight!
by OffSite (3/23/10)
Anyone who thought this bill wasn’t about killing the insurance industry had better think again - One of the existing regulations in the industry is that each company must maintain a 65%-35% balance of cash on hand-the 65% to pay any premiums that come along in a fiscal year. The number was thought up because if a catastrophe caused a number of claims at once, a company needed to be able to pay them. That 65% is mandated by law. The remaining 35% is to pay operation expenses like payroll, training, etcetera. A company that falls below that ratio is considered “unstable” by both state and federal regulators. A rating of instability will invite more audits, fines, and eventually could lead to losing to their license to trade in that state.
...That is, until Sunday night. The mandated ratio of 65%-35% was raised to 85%-15%. Operating expenditures drop 20%, but the unusable cash rises to 85%. This author, nor any of the staff, went to Harvard, but even we can see legislation designed to kill an industry. Full Piece
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