Study: Insurance regulators less likely to intervene in election years
New research from the Wisconsin School of Business has found that the likelihood of regulatory interventions by state insurance departments decreases significantly in election years. The University of Wisconsin-Madison researchers concluded that appointed state insurance commissioners mainly delay intervening with failing firms prior to elections in which the appointing governor is in a competitive race. However, they did not delay in elections in which the appointing governor is likely to be re-elected. At the same time, elected regulators were found to delay action before all elections, regardless of competitiveness. The study sampled data from 3,200 firms and 300 separate elections across the 50 states from 1989 to 2011. “The announcement of a regulatory intervention is basically an admission that a firm has failed on a regulator’s watch — it’s bad news,” said Ty Leverty, associate professor of risk and insurance, who led the Wisconsin study. “Elected regulators who are at the mercy of political considerations are likely to be driven by those concerns, and our findings confirm that.” The study also found that the frequency of discretionary financial exams specifically requested by state insurance commissioners was 44 percent lower in the year before an election compared with the year after. The paper, “Do Elections Delay Regulatory Action?” is forthcoming in the Journal of Financial Economics.