Indiana Department Schedules School Pooling Public Hearing

The Indiana Department of Insurance announced that it will hold a public hearing on Thursday, Nov. 29 on a proposed school pooling regulation. According to the Department, one of the most important issues under consideration is whether a school’s mandatory participation requirement should be set at one year or three years.

The proposed regulation contains the one-year requirement, which the Insurance Institute of Indiana supports. Various insurance brokers, however, are lobbying hard for the Department to insert a three-year minimum requirement.

“This regulation should take into consideration what is best for the schools, not what is best for the broker,” Insurance Institute President Steve Williams said. “A three-year minimum ties a school’s hands, locking them into a contract that may not be their best option. With pooling being a new concept, schools potentially are being opened up to unlimited liability.”

Unlike insurance policies, which can be cancelled at any time during the contract period with no adverse impact, a pool shares all the losses of all the pool members not only up until that time, but for years afterwards. This occurs because of the ongoing medical and legal bills that often come in, leaving pool members paying for losses down the road. A one-year pool membership cap would allow school districts and board members a chance to review financial information and not be locked into multiple years of losses of unknown amounts.

The brokers lobbying for the change also supported Indiana’s school pooling law to be passed during the 2006 legislative session. Since the law went into effect on July 1, there has been no regulation issued by the Department.

At the time of implementation, the Insurance Institute lobbied against the school pooling law, citing frequent cases of pool insolvencies. These insolvencies – which have occurred in Missouri, Colorado, Texas, Kentucky, Florida, Mississippi and Illinois – have left taxpayers on the hook for millions of dollars in unpaid claims. In Indiana, the insurance industry fears a three-year requirement could put taxpayers at a risk. Pools rightfully have no access to the Indiana Guaranty Association.

“When a school enters into a traditional insurance contract, the school is protected in its ability to cancel at any time,” Williams said. “Why would the government want to require pooling schools to enter into three-year agreements that have proven to be more of a risk?”

The Insurance Institute as well as the Independent Insurance Agents of Indiana will testify in favor of the regulation as written, with a one-year requirement.

At this writing it is unclear when a final regulation will be issued after the public hearing.

The Insurance Institute of Indiana is an insurance trade association representing insurance companies doing business in Indiana.

Source: Insurance Institute of Indiana