1. Thou shalt not cancel a private passenger motor vehicle policy in California or Oregon solely on the basis that the vehicle has been made available for personal vehicle sharing (CA Ins. Code Sec. 11580.24 effective 1/1/11; OR HB 3149 effective 1/1/2012)
2. Thou shalt not deny coverage, increase any premium, or otherwise discriminate against any Florida insured or applicant based upon lawful ownership, possession or storage of a firearm or ammunition. (Ins. Code Sec. 790.338, effective 6/2/2011)
3. Thou shalt not terminate, deny or fail to pay claims under a Maryland homeowner’s policy solely on the basis of an individual’s status as a victim of a violent crime. (House Bill 647 and Senate Bill 317 effective 10/1/2011; policy form compliance required by 10/1/2012)
4. Thou shalt not refuse to issue or renew an individually-owned private passenger automobile policy in New York solely on the ground that the covered motor vehicle is used for volunteer firefighting. (AB 1007 effective 9/16/2011)
5. Thou shalt not reduce coverage under a personal or covered commercial lines policy in Texas unless 30 days’ written notice has been provided to the policyholder. (HB 2655 effective 9/1/2011)
6. Thou shalt not base private passenger motor vehicle insurance rates, premium charges, premium adjustments or risk classifications on an insured’s credit information in Massachusetts.  While a related regulation previously existed, the Massachusetts legislature clarified its intent with statutory codification. (HB 3795 effective 2/20/2012)
7. Thou shalt determine whether a New Jersey risk is an “eligible person” for private passenger automobile policy nonrenewal in compliance with updated standards. (NJAC 11:3-8 amended effective 9/19/2011)
8. Thou shalt modify the required language contained in the Colorado private passenger automobile Summary Disclosure Form regarding coverages, policy cancellation, nonrenewal, and increase in premium. (Reg. 5-2-16 amended effective 1/1/2012)
9.  Thou shalt determine whether an insured California driver or applicant may be considered to be principally at-fault for an accident in compliance with revised statutory guidelines. (Ins. Code Sec. 2632.13 amended effective 12/11/2011)
10. Thou shalt recognize overseas military service as an extraordinary life event exception to an adverse action based on credit information on a Montana policy. (HB 29 effective 5/5/2011)

Editor’s Note:  Keep up to date with regulatory commandments on adverse action with NILS INsource and the AuthenticWeb Adverse Decision Matrices.

• Alaska: Insurance scoring models are considered a trade secret and are not subject to public inspection. (21.39.035)
• Arkansas: Specific information must be submitted in connection with any filing of interest-indexed universal life insurance policies, with all such information being treated confidentially to the extent permitted by law. (Rule and Regulation 34 s 11)
• Colorado: The Division does not allow a company to designate an entire filing as confidential, except as permitted by law. If confidential information is being submitted within a filing, a Confidentiality Index must be submitted separately in SERFF and made available to the public for inspection. The confidential information must be submitted as a separate exhibit, report or attachment and clearly marked CONFIDENTIAL HANDLING REQUESTED. (Bulletin B-4.18; Bulletin B-1.15)
• Georgia: Any filing relating to credit information is considered to be a trade secret and proprietary information of the entity filing the information and not be subject to public disclosure. (33-24-95)
• Iowa: Insurers’ credit scoring models or other scoring processes filed are considered a confidential record and are recognized and protected as trade secrets. (515.103)
• Massachusetts: Small group rate filing materials submitted for review are deemed confidential and exempt from the definition of public records. (211 CMR 66.09)
• Oregon:  Health benefit plan rate filings for individual, small group and portability filings are available for public access and are posted when the filing is determined by the Oregon Insurance Division to be complete. Any other requests for confidentiality will be considered on a case-by-case basis and must meet the criteria for trade secret information pursuant to Oregon Public Records Laws ORS 192.501(2) and the Uniform Trade Secrets Act ORS 646.461(4) to be eligible for exemption from disclosure.
• Washington: Credit life and credit accident and health insurers, desiring the commissioner to withhold experience and proprietary rate development methods from public disclosure, must file that information in a separate actuarial memorandum and clearly identify the information that is confidential. (284-34-220)

Of course confidential documents may not be entirely “confidential” when their production is sought under a court order to release the information and there are states where confidentiality provisions do not exist due to public access laws. Included in that latter group of states are Arizona, with its open records law providing that all filings made in that state are public records, and Connecticut with its Freedom of Information Act.

There were changes in 2011 to regulatory requirements and procedures for gaining protected status for certain filed information. Alabama’s SB 395 enacted provisions for the confidentiality of certain homeowners rate filing information. Effective Sept. 1, 2011, the bill provides that proprietary actuarial risk analysis or forecasting information or information otherwise restricted by statute or regulation included in a rate filing or related actuarial information is considered to be a commercially valuable trade secret and held confidential. From a filing perspective, the Alabama Department of Insurance requires that filers submit what they consider confidential information under separate cover, clearly stating the desires of the party filing the information as to its confidentiality. The designated information is to be maintained by the Department in a manner that keeps it separate and distinct from all of the records available for public inspection, absent a court order. The Department also issued a Bulletin on Aug. 26, 2011, providing additional information on homeowners rate filings and the confidentiality provisions.

The most recent regulatory change regarding the confidentiality of various filing documents became effective Dec. 8, 2011 in Utah. The new requirements are set forth in R590-225-11 and address the “protected” classification of documents in property and casualty filings. The Department of Insurance indicates that it will not classify certain information in property and casualty rate filings as protected unless companies comply with the established procedures. The requirements to procure a label of “protected,” and therefore not open for public inspection, are directly related toUtah’s Government Records Access and Management Act (GRAMA.) Filing requirements include:

• Filer needs to request which specific document the filer believes qualifies under GRAMA when the filing is submitted
• The document must include a written statement of reasons supporting the request that the information should be classified as protected

Among other provisions and timeframes, the regulation further specifies that if the filer does not request the information in the document to be classified as protected, the document will be classified as public, with the Department neither automatically classifying any document in a filing as protected nor re-opening a filing to permit a company to request protected classification of previously filed documents.

Knowing of the availability of a confidential or protected status for certain information filed with the various departments of insurance, as well as adhering to any specific requirements that might be outlined by the states, are key steps required to achieve insurers’ goals of preserving the confidentiality of proprietary information.

Keep current with confidential and proprietary information filing requirements with AuthenticWeb for State Filing.

A major element involves the question of Essential Health Benefits (EHBs) for non-grandfathered plans affecting individuals and small groups under PPACA beginning in 2014. In December, HHS issued a bulletin announcing that some of the control over these aspects of coverage under the Act would be granted to the states in an attempt to provide states, carriers and consumers the flexibility and choice that many have urged. Included in the required benefit categories involved are:

• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder services, including behavioral health treatment
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services, including oral and vision care

Health plans would be required to offer coverage that is “substantially equal” to the benchmark plan chosen by the state and reflecting all 10 categories, but would have flexibility to make adjustments that retain the value of the coverage. The HHS plan announced in the bulletin permits states to choose their own benchmark for what constitutes an EHB package, and affects covered services. It does not address cost sharing (such as deductibles and copays) or calculations of actuarial value. According to HHS, for 2014 and 2015, states may choose from the following as a basis for their benchmark:

• One of the three largest small group plans in the state
• One of the three largest state employee health plans
• One of the three largest federal employee health plan options
• The largest HMO plan offered in the state’s commercial market

HHS plans to propose that the default benchmark for states opting not to select their own will be the small group plan with the largest enrollment in the state. Modifications could be made to a benefit category but must not reduce the value of coverage. For 2016 and beyond, HHS will assess the process “based on evaluation and feedback.”

The Department is encouraging public input on this subject by January 31, 2012, asking that comments be sent to EssentialHealthBenefits@cms.hhs.gov.

Editor’s Recommendation: NILS INsource can help keep you current with PPACA and healthcare reform initiatives.

Click here to view these latest web seminars:

http://ins.wolterskluwerfs.com/forms/2011RegTrendswebseminarregistrationform

In September, California Governor Jerry Brown signed AB 689 into law. The new law requires insurers to verify that an annuity purchase, replacement or exchange is reasonably suitable for the consumer based on an evaluation of the individual’s age, income, liquidity needs and financial objectives, among other factors. It also requires that a consumer receive a tangible net benefit from the purchase of the annuity. The DOI can revoke an agent’s license, impose fines, and/or order that lost funds be restored to the consumer when an unsuitable annuity is sold.

The new requirements derive from the NAIC’s Suitability in Annuity Transactions Model Regulation (Model 275) requiring insurers to establish a system to supervise recommendations so that the insurance needs and financial objectives of consumers are appropriately addressed. Also, the new law is the state’s response to the Dodd-Frank Wall Street Reform and Consumer Protection Act where states must adopt annuity suitability standards similar to those in Model 275 or lose its right to regulate products such as indexed annuities.

Prior to January 1st, California required annuity sellers to give consumers replacing annuities at least 30 days to get their money back, and it also prohibited annuity sellers from using materially inaccurate presentations to recommend that senior citizens buy unnecessary replacement annuities. However, there was no law requiring an insurer or an agent to determine whether an annuity was suitable for a consumer before recommending it.

Ensuring protection for seniors, a rapidly growing population, is a good way to start the New Year.

Editor’s Recommendation: Stay on top of changing life insurance and annuity laws with NILS INsource.

What is a new product?  The Oregon Division of Insurance website contains relevant regulatory guidance.  (Kudos to the Oregon Division of Insurance for providing one of the most informative regulatory websites available.  It is a treasure trove of useful industry information.)  The Division’s view is that new product designs are those “that are not defined by statute, are out of the ordinary, or may not fit into a particular category of insurance.”

Once new product design is complete, it must pass regulatory review before being brought to market.  At this point, it is extremely important for the state filer to work closely with the regulator to expedite the regulatory process.  Oregon suggests that filers follow an informal review process that appears to be good advice on introducing a product in any jurisdiction.  Essentially, the insurer needs to open a conversation with the regulator and provide the following information prior to filing:

-  Type of product, how it differs from products currently in the market, and why it doesn’t fit into a category, and the need for the product in the market
-  Any applicable, completed state-specific Review Requirements Checklist that is related to the new product
-  How the product complies or doesn’t comply with existing state statutes and applicable Checklist requirements
-  Explanation of the company’s targeted market
-  Other jurisdictions where the product has been filed and approved for use

California, New Jersey  and Texas are among other states providing specific written regulatory guidance on new product filings.  In our experience, most regulators prefer to receive this kind of information in advance as it allows them to question, understand and troubleshoot potential compliance problems, and to ultimately expedite the filing review and approval process.

Editor’s Recommendation:  Research new product filing requirements easily with AuthenticWeb for State Filing.

California market conduct exams across multiple lines of business have indicated violations of Insurance Code §880 which provides that “…every insurer shall conduct its business in this State in its own name.” In a recent June 2011 exam, a property and casualty company failed to conduct business in its own name in 26 instances. Market conduct examiners found that correspondences sent from the company to the insured/claimant indicated the incorrect underwriting company. One year earlier, another California exam indicated that a company’s third party administrator for its extended warranty business failed to include the correct underwriting company on correspondences in 76 instances. Some California life insurance exams noted the following “own name” compliance issues:

• The claim form for the individual life product failed to include the complete company name
• The “Explanation of Benefits” and “Acknowledgment of Claim” letters for the fixed annuity product failed to include the complete company name
• In 7 instances, the company failed to conduct its business in its own name in that its correspondence did not properly identify the correct underwriting company

Recent property and casualty enforcement actions in Washington provide us other examples where insurers were found to have not used the right name consistently in various documents. In an August 2010 enforcement action, market conduct examiners found that all of the claims checks issued during the examination period showed an abbreviated company name on the checks rather than the correct name of the insuring company. This exam also included a determination that 1,535 antique auto policies issued during the examination period similarly showed an abbreviated company name on the declarations rather than the correct identity of the insurer. Additionally, correspondence in twelve claim files contained letters with references to the brand name of the company rather than the correct name of the insurer or referred to multiple insurers. Moreover, it was determined that twelve boat cancellation notices used an abbreviated company name letterhead and incorrectly referred to that abbreviated name as the insurer in the body of the text.

More recently, a May 2011 order determined that based on an examination of a list of 2,026 forms, 193 non-billing forms failed to properly identify the legal name of the insurer. Additional compliance issues included the following

• Market conduct examiners from the OIC upon reviewing a random sample of 125 forms…including 100 non-marketing forms and 25 marketing and sales forms, found letters and pre-paid envelopes that failed to properly identify the legal name of the insurer
• 100% of the computerized billing statements …failed to identify the proper legal name of the insuring company
• An average of 41,582 consumers per month during the stated time period received non-compliant billing statements

While this type of compliance issue has not historically made its way into the “top 10” for any line of business, it is yet another area of potential concern for some insurers when validating their current processes and controls.

Editor’s Recommendation: Stay current with market conduct activity quickly and easily with the Market Conduct Exam Module for Life and Health Insurers and ComplianceWare for property and casualty insurers.

Each year property and casualty adverse action notice compliance problems make it into the top 10 list of market conduct examiners’ criticisms. These issues include the requirements for days’ notice, mail type, permitted reasons and actual notice requirements needed on the face of the form or letter itself. We have written about these common issues in the past, but let’s not forget about some of the not-as-frequently criticized items that insurers still need to watch out for!

Multiple copies needed for the insured

In several states more than one copy of the notice to the insured is required to be sent to the insured for adverse actions in certain circumstances. The need for multiple copies to an insured is due to the insured’s “right of review” or “right to protest.” This right means that the insured has the right to have the commissioner of insurance review the proposed action if the insured wishes. The multiple copies allow for the insured to sign at least one of the copies and send it to the commissioner.

In Pennsylvania, for all personal lines of business, the insurer must send the insured’s notice in duplicate for cancellations, including cancellations due to nonpayment of premium, or refusals to renew. In Colorado and Maryland, the insurer must send three copies of the adverse action notice for personal automobile cancellations, nonrenewals and coverage reductions, not including cancellations due to nonpayment of premium. This triplicate requirement also extends to notice of an increase in premium in Colorado; in Maryland, duplicate notice is required for premium increases.  Does your company write in one of these 3 states and is the company aware of these multiple copy requirements?

Filing requirements

Another requirement to watch out for is the appropriate filing requirement. For adverse action notices, these rules are not always straightforward either. Most states do not require filing for the adverse action notice. Generally, this is based on a regulatory interpretation that policyholder notices which do not change policy terms or conditions do not become “a part of the policy” and require filing. The no-filing-required states include Alaska, California, Louisiana, New Jersey and New York.

However, about a third of the jurisdictions, including Delaware, District of Columbia, Missouri and West Virginia, do require filing. There are also a handful of states that have varied filing requirements. In those states the filing requirement depends upon what line of business or circumstance applies to intended notice. For example, in Colorado, filing in most situations is not needed; however, notices for automobile and claims-made liability types of insurance are subject to the state’s file and use requirements. Another example of a state with varied filing requirements is South Carolina. Here the insurer must use either the “use-and-file” method of filing versus the “prior approval” method depending upon the line of business involved. Is your company aware of the appropriate filing requirement in the state where you write?

Conservative package policy approach

For package policies, where the law requires different rules for different lines of business, insurers may want to consider a conservative approach. When issuing adverse action notices, insurers may want to use the strictest relevant rule. For example, in Nebraska, if a personal lines package policy includes personal automobile, homeowners and inland marine coverages, the insurer must comply with each of the package policy’s line of business requirements in order to nonrenew the package policy. In this case, the insurer must give 20 days’ notice to nonrenew the personal automobile policy and 60 days’ notice to nonrenew the homeowners and inland marine policies. When the insurer sends the notice of nonrenewal, the stricter, more conservative approach would be to use the 60 days’ notice requirement to ensure compliance. Likewise, if one line of business in the policy requires the reason for the adverse action to be written on the notice to the insured, but another line of business in the policy does not, a “best business practice” is to use the more conservative requirement and include the reason on the notice. Is your company using this approach?

Editor’s Recommendation:  Keep on top of property and casualty adverse action compliance requirements easily using AuthenticWeb for Cancellation & Nonrenewal.

Regulatory guidance often specifies that USPS delivery is required.  A minimum number of advance days’ notice to the policyholder is also often required for many policy transactions to be compliant.  First-class delivery is generally the “gold standard” by which notifications must be delivered to policyholders.  Many insurers add more days to account for mail processing time to the statutory minimum days’ notice requirement as a best business practice in order to avoid potential noncompliance and market conduct exposure.  These internal practices covering mail time and delivery procedures should be reviewed for continued compliance in light of the USPS proposals.  Does the company provide adequate advance notice for claims disclosures and payments, policyholder appeals, consumer disclosures, premium payments and refunds, and adverse action and renewal notices?

Insurers must currently comply with state regulatory guidance that is inconsistent at best with respect to statutory minimums for advance notice and added mail time: 

Maine law states that a postal service certificate of mailing to the named insured at the insured’s last known address is conclusive proof of receipt of a policy cancellation notice on the 5th calendar day after mailing.

Connecticut determines compliance with the minimum advance days’ notice period by counting the number of calendar days beginning with the 1st day after the date of mailing of the notice up to, but not including, the renewal or anniversary date of the policy.

Illinois computes the required compliance period by excluding the first day and including the last of the statutory minimum period, unless the last day is Saturday or Sunday or is a holiday. 

In addition to inconsistent state requirements on mail time, additional issues will arise if the USPS cuts service as proposed. What about the impact on delivery time to rural areas compared to urban areas, which are more likely to be closer to a processing center and have faster service?  How long must an insurer wait to determine whether an overdue premium payment is considered “unpaid” for purposes of policy cancellation?  How will slower postal service impact prescription drug ordering and deliveries?  

If the USPS service standard changes, it is likely to spark legislative and regulatory activity as states respond.  Statutes that require USPS mail delivery may have to be amended to allow insurers more alternatives.  Many states, such as Louisiana, have enacted laws that permit electronic delivery of policies and related policy notifications as well as delivery by private couriers in addition to USPS delivery.  Although all states have adopted the Uniform Electronic Transactions Act, electronic transmittal is not the immediate solution. Until the time that all policyholders have access to secure personal computers and give consent to receive policy communications electronically, insurers must comply with mailing requirements.   As the USPS seeks to regain solid financial footing, it may find that these proposed service cuts are ultimately counterproductive as customers increasingly turn to private couriers and the internet for faster delivery. 

Editor’s Recommendation:  Effectively research mailing and delivery requirements, and related legislative activity, in all jurisdictions with NILS INsource and the AuthenticWeb Adverse Decision Matrices.