Although we are only a little over a quarter of the way throughthis legislative year, the insurance industry has already seen somesignificant enacted bills that will impact P&C companies'policies and procedures.

The Auto Front

Automobile insurance underwriting in Colorado will be changingsoon with the enactment of HB 1289 on Apr. 12, 2012. With aprojected effective date of Aug. 9, 2012, this bill substantiallychanges the procedures for a complaint (currently referred to asthe “right of the insured to protest”) to be filed by an individualfor specified adverse actions by an insurer. Existing detailedprovisions for the right to protest, including requiring thepolicyholder to sign two copies of the notice and send them to thecommissioner within 10 days after receipt of the notice, will beeliminated.

In its place is a simplified approach in which individuals willuse a complaint process, providing similar rights available underthe right to protest while making the process more flexible andstreamlined for consumers and insurers. However, insurers mustcontinue to advise policyholders of the right of the insured tofile a complaint with the division of insurance regarding theaction that is the subject of the notice.

Another state with a recent enactment affecting adverse actionsis Idaho. HB 1268 has increased the upper limit of permitteddeductibles when insurers are conditionally renewing automobileinsurance policies. Effective July 1, 2012, the maximum deductibleis $250 for comprehensive coverage, formerly $150, and $500 forcollision or physical damage coverages, formerly $300.

Policies and Claims Practices

Addressing policy issuance, Virginia's HB 133, effective July 1,2012, provides for the posting of property and casualty insuranceforms and endorsements that do not contain personally identifiableinformation to the insurer's publicly available website.

Insurers opting for this process, instead of the moretraditional methods of delivering policy forms and endorsement,must provide written notice at time of the issuance of the initialpolicy forms and any renewal forms of a method by whichpolicyholders may obtain, upon request and without charge, a paperor electronic copy of their policy or contract. Similar noticerequirements apply to insurers in communicating to policyholderswhen changes are made to the forms or endorsements and of the rightto obtain, upon request and without charge, a paper or electroniccopy.

Claims changes are also impacting insurers. Kentucky's HB 207,signed into law on Apr. 11, requires insurers to provide a loss runstatement to an insured or an insurer's agent within 20 calendardays of receiving a written request submitted by the insured or theinsurer's agent. In turn, an insurer's agent that receives such aloss run is to provide a copy of the loss run statement to theinsured within five calendar days of receipt. Specifically, theloss run must be a five-year loss run history for the prior fiveyears or a complete loss run history with the insurer if thehistory is less than five years. Penalties for failure to complywith these requirements are also included in HB 207.

This Kentucky bill also addresses steering in motor vehicleinsurance claims. Effective July 1, 2012, insurers are required toinform a claimant upon notification of a motor vehicle damage claimthat he or she has the right to choose the repair facility of hisor her choice to repair a damaged vehicle. Additionally, allappraisals are required to include the following notice, printed innot less than 10-point boldfaced type: “NOTICE: UNDER KENTUCKY LAW,THE CONSUMER AND/OR LESSEE HAS THE RIGHT TO CHOOSE THE REPAIRFACILITY TO MAKE REPAIRS TO HIS OR HER MOTOR VEHICLE.”

We also have a statutory change which affects both underwritingand claim processes. Maryland's HB 301 revises that state's fraudwarning as it no longer requires knowing and willful conduct aselements of the crime of insurance fraud. Effective Jan. 1, 2013,all applications for insurance and all claim forms, regardless ofthe form of transmission, are required to contain the followingstatement or a substantially similar statement:

“Any person who knowingly or willfully presents a false orfraudulent claim for payment of a loss or benefit or who knowinglyor willfully presents false information in an application forinsurance is guilty of a crime and may be subject to fines andconfinement in prison.”

The year is definitely still young, but the legislativedevelopments requiring changes in the way insurers do businesscontinue. As we move forward in 2012, many pending proposals aresure to be enacted with even more impacts on existing policies andprocedures.