A bill to increase state oversight of self-insurance groups run by organizations such as the Kentucky League of Cities and the Kentucky Association of Counties was approved unanimously by a legislative committee Tuesday.
The bill's sponsor, Sen. Tom Buford, R-Nicholasville, said he worked on the legislation with the Department of Insurance in the wake of spending problems at both organizations.
"The mice were running wild, and they figured out how to get out of the traps," Buford said before the Senate Banking and Insurance Committee took up his bill Tuesday. "This will make them follow best practices."
The bill clarifies language to put the state's seven self-insurance funds — for groups as diverse as the Kentucky School Boards' Insurance Trust and the City of Louisville — and all their insurance lines under the same state laws regarding unfair practices. Previously, the department monitored all worker-compensation funds but did not have the same oversight of liability and property self-insurance funds.
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The bill also would define what kinds of investments the insurance funds can make and would require them to make financial reports four times a year and show financial reports to any insured member who asks for them.
It also requires the organizations to establish a formal conflict-of-interest policy or code of conduct for board members, officers and employees.
In December, State Auditor Crit Luallen found numerous conflicts of interest in the insurance wing of the League, including gifts and trips for League employees paid for by insurance vendors.
Buford said he discussed the bill with representatives of KACo and the League.
"We have talked to Senator Buford and DOI and currently have no problem with the bill," said League Deputy Director Neil Hackworth.
Department of Insurance Commissioner Sharon Clark said the bill will make it easier for the state to protect members of the funds.
"The department just wants to be able to do our jobs," Clark said.