Regulatory Change Update: That Familiar Feeling

2011 Issues Continue to Dominate

With just a little over a month into 2012, the industry has seen the introduction of a number of legislative bills that address familiar insurance topics. Additionally, we are already seeing a number of actions by departments of insurance, all of which are factoring into important regulatory activity early in this new year.

Familiarity Breeds Contempt

Fraud prevention is one of the issues regulators have focused on for the past few years, and it seems that will not be changing anytime soon. Kansas, for example, has a pending HB 2485, which proposes a requirement that insurers submit antifraud plans, as well as a requirement for fraud warnings on applications and claims forms.

Another familiar topic is credit scoring. Proposed restrictions regarding the use of credit information in rating and/or underwriting have been introduced in a number of states, including:

  • Kentucky (SB 31)
  • Michigan (HB 5244)
  • Missouri (HB 1406)
  • Rhode Island (SB 2074)
  • Virginia (HB 355, HB 434, SB 350)
  • West Virginia (HB 2049)

Provisions to Ponder

Portable electronics insurance provisions were a frequent subject of legislative and regulatory focus in 2011. Ohio’s SB 246 (2011), which provides for the authority of the Ohio Department of Insurance (ODI) over that line of business, becomes effective on March 22, 2012. Meanwhile Oregon’s OAR 836-071-0550 to 836-071-0570 became effective on Jan. 1, 2012, establishing the regulatory framework for portable electronic device vendors to sell, or offer for sale, portable electronic devices insurance coverage. The trend continues in 2012, with bills introduced in many states, including Arizona, Colorado, Florida, Indiana, New Hampshire, Pennsylvania, Utah, and Washington.

Departmental Directives

The state legislatures are not alone in dealing with industry issues. Reviewing three insurance department directives issued in January 2012 provides important information for insurance company operations. The Tennessee Insurance Division’s (TID) Bulletin, dated Jan. 26, 2012, provides its interpretation on the use of email messages and compliance issues associated with statutorily required notifications to policyholders. The division will require that:

  • Policyholders be given the option to continue to receive hard copy mailings of notice requirements or other communications.
  • The insurer make a disclosure to any policyholder electing to receive communications electronically, either in the language of the policy itself or in a separate disclosure form presented for the policyholder’s signature.
  • The disclosure must contain the following or substantially similar language: “The policyholder electing to allow for notices and communications to be sent to the electronic mail address provided by the policyholder should be aware that the insurer rightfully considers this election to be consent by the policyholder that all notices may be sent electronically, including notice of nonrenewal and notice of cancellation. Therefore the policyholder should be diligent in updating the electronic mail address provided to the insurer in the event that the address should change.”

Questions Being Asked

The Maryland Insurance Administration’s (MIA) Bulletin, dated Dec. 1, 2011, stipulates, “Contact information in the event of a disaster or catastrophic event” requires specific information to be submitted to the MIA by close of business on Apr. 16, 2012. In addition to the actual company contact information, insurers are required to respond to specific questions, including:

  • Does your company have a plan in place to assist your policyholders in the event of a disaster that occurs in Maryland (for instance, hurricane, tornado, flood, or pandemic flu)? Who is the primary contact for this plan? The MIA indicates that this person must be able to respond in the event of a specific emergency or catastrophe and handle claims-related questions.
  • Does your company have a continuity of operations plan that will allow you to continue to provide service to your customers? Who is the primary contact for this plan? The MIA indicates that this person needs to be able to handle continuity of operations questions in the event of some disruption at your workplace, be it a disaster or other event.
  • Does your company have a pandemic flu plan? Who is the primary contact for this plan? The MIA indicates that this person needs to be able to handle continuity of operations questions in the event of some disruption at your workplace, in the event of a pandemic flu.

According to Montana’s Advisory Memorandum of Jan. 9, 2012, “Filing electronic and telephonic application insurance forms” reminds insurers that since all application forms must be filed with and approved by the division, questions that elicit information used in the underwriting or rating process must be filed and also approved. The industry has a filing deadline of May 9, 2012, to file all electronic application forms, as well as those completed by telephone, including any currently in use.

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