Summary: GAO discussed its 1979 report on issues and needed improvements in state regulation of the insurance industry. GAO found that insurance availability was affected by: (1) redlining, which is the arbitrary denial of insurance to everyone living in a particular neighborhood; (2) subjective underwriting practices which could result in consumers being denied essential insurance because of unsubstantiated judgments; and (3) limited state protection to consumers who had adverse underwriting decisions. GAO also found that state insurance departments: (1) lacked sufficient information to regulate the industry effectively; (2) had limited authority to act on consumer complaints; (3) did not have systematic complaint handling procedures; and (4) needed to substantially improve their market conduct examinations of trade practices. GAO analyzed automobile insurance regulation in more detail and found that: (1) state departments had not evaluated the risk classification system to determine if its use constituted unfair discrimination; and (2) insurance costs did not vary noticeably between states that required prior approval of insurance rates and those that did not.
