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The report focuses on the
Department’s ability to efficiently and effectively fulfill its role to regulate
insurance rates and investigate insurance fraud. Although Arizona adopted an open
competition approach to regulating most property and casualty rates in 1980, the
Department continues to subject all rate filings to the same scrutiny as it did when rates
required Department approval prior to their use. Since market forces serve as the primary
regulator of rates in an open competition environment, such detailed and comprehensive
reviews are unnecessary and offer minimal consumer protection. Rather than reviewing every
filing in detail, the Department should adopt a targeted approach to reviewing open
competition rate filings. Furthermore, because an open competition environment depends on
competitive markets, the Department should expand its market monitoring activities to
ensure that all insurance markets remain competitive. In addition, while the
Department’s Fraud Unit has improved its efforts and ability to successfully pursue
insurance fraud, inadequate tracking and analysis of referrals may ultimately limit its
impact in fighting insurance fraud.
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