At a time when corporate board members are being spotlighted following the fiasco at Enron and other financially troubled firms, it was alarming to hear Massachusetts insurance regulators complain that they found a high degree of ignorance in insurer boardrooms about the basic workings of the business.
Many “lack basic knowledge of products, risks and statutory accounting,” Massachusetts Insurance Commissioner Julianne Bowler said during a recent seminar. As one example, she said some directors did not even know the difference between personal and commercial lines. In another example, Bowler said that some directors could not say whether a current IT system would support a new product.
She also said her department failed to find vigorous oversight by board directors at some carriers. In such companies, she reported, directors either “completely acquiesced to management or asked perfunctory questions.” Not exactly the watchdogs that shareholders expect.