Institutions, Bureaucratic Decisions, and Policy Outcomes: State Insurance Solvency Regulation

Although over the past 2 decades several scholars have documented a link between institutional arrangements and policy choices, few studies have demonstrated how different institutional arrangements give rise to different policy outcomes. Further, although some studies have related bureaucratic resources to policy decisions, almost none have illustrated that the way state agencies actually deploy regulatory resources—policy outputs—significantly influences policy outcomes. Focusing specifically on the insurance industry in the United States, in this article we illustrate the impact of state regulatory activities on the solvency of firms in the insurance industry from 1987 to 1997, and in doing so we emphasize the differences between policy outputs and policy outcomes. In the case of policy outputs, for example, we find that elected insurance commissioners, divided state government, budgetary resources, and larger insurance sectors lead to more aggressive solvency examinations of insurers. In addition to examinations, however, we discern an important role for both regulatory and political institutions in subsequent insurer insolvencies.