Regulator pitches first fee hike in more than a decade: The state Department of Insurance plans to hire 10

Indiana’s thinly funded Insurance Department is pushing to raise nearly $1 million by hiking fees it charges insurers for the first time since 1994.

The department also plans to shrink agent licenses from four years to two, in order to raise money and bolster continuing-education requirements.

Insurance Commissioner Jim Atterholt hopes to win legislative approval this session for the measures, which would add $960,000 to the department’s $5.8 million operating budget and allow it to boost its work force from 85 to 92. The extra employees would beef up the department’s Consumer, Company Compliance and Financial divisions.

For instance, the Consumer Division, which has eight employees, would add three to help it handle the roughly 1,200 phone calls and 110 formal complaints the department fields every week.

“We’ve got to make sure they’re thoroughly researched and the company properly addresses the consumer’s needs,” Atterholt said. “To be honest with you, they’re swamped down there.”

The fee increases are fine with some industry representatives, as long as the additional money is used for its intended purpose and doesn’t get swallowed by the state’s general fund, said Steve Williams, CEO of the Insurance Institute of Indiana, a trade association.

Williams noted that the industry already pays Indiana more than $180 million a year in premium taxes, and only a few million dollars winds up in the Insurance Department.

“There’s a fair amount of money going into the state and an insufficient amount being siphoned off to pay for the regulatory cost,” he said.

Atterholt said he understands Williams’ concern and will “try to address them more specifically as the legislation moves forward.”

The commissioner would like to increase the annual internal audit fee the department charges insurers from $350 to $1,000. He also wants to impose a $35 fee per form filed by insurers who change products or bring a new one to market.

Insurers sometimes submit several forms and pay only one $35 fee. The new charge would come with a $1,000 cap per filing.

The commissioner also wants Indiana to join 48 other states in requiring agents to renew their licenses every two years instead of every four. The state charges $40 for Indiana residents and $90 for non-residents.

Aside from bringing in more money, the shorter renewal period would require agents to stay more current on their continuing education requirements, the commissioner noted.

The department hasn’t increased fees since the internal audit charge was created in 1994, said Amy Strati, the department’s chief counsel.

The department’s operating budget has risen slowly through the years, keeping pace with inflation.

But Indiana ranks last in the nation when its Insurance Department budget size is compared to the amount of premiums written in the state, according to the Missouri-based National Association of Insurance Commissioners.

Indiana insurers wrote more than $23 billion in premiums in 2004, according to the association.

Maryland’s Insurance Department reported $22 billion in premiums that same year, but employs 300 people, more than three times as many as Indiana, according to a letter Atterholt sent last fall to state Budget Director Chuck Charles Schalliol.

Indiana’s department is “certainly not advocating a staff of 300,” Atterholt wrote. But he noted that 10 more employees would have a “dramatic impact” on effectiveness.

The department also wants to add three employees to help with its Patient’s Compensation Fund, which is funded separately from the department’s operating budget.

Williams said gubernatorial administrations he’s seen since joining the institute about 25 years ago “oftentimes give the department short shrift when it comes to funding.”

State Rep. Craig Fry, D-Mishawaka, agrees.

Fry, chairman of the House Insurance and Corporations Committee, will work with the Republican commissioner to present legislation calling for the fee increases.

“This isn’t a partisan issue; this is an ongoing problem that’s faced every commissioner since I’ve been in the Legislature,” said Fry, who is serving his 10th term in the Statehouse.

Atterholt said he’s optimistic the measure will win approval, given his backing and Fry’s.

“We are marching lock step on this. I’m very optimistic,” he said. “Chairman Fry has been in the Legislature long enough to certainly recognize that the needs of the department have not been met from a funding perspective.”