The Sarbanes-Oxley (SOX) Act, implemented in 2002, came in response to a wave of corporate scandals, such as Enron and WorldCom, which raised concerns about the integrity of the accounting information provided to the public.
Executive SummaryThe ability of property/casualty insurers to set loss reserves has not changed as a result of the enactment of The Sarbanes-Oxley Act of 2002, according to researchers from Illinois State University and Pinnacle Actuarial Resources. The persistence of patterns in reserve errors rather than random effects suggests the same level of earnings management before and after SOX.
Distrust of Corporate America was at an all-time high—and the insurance industry was most certainly not immune from the public’s ire. According to Edelman’s 2011 Trust Barometer, among 13 major industries, the insurance sector consistently ranks near the bottom in terms of consumer trust; almost two-out-of three Americans said they don’t trust insurers “to do what is right.”
(Editor’s Note: The just-published 2013 Trust Barometer puts financial services at the bottom again, with only 50 percent of the informed public trusting the banking and financial services industries on a global basis.)