Some states have been busy this year adopting new and revisedrequirements impacting insurers' underwriting processes. Fromcredit scoring to hurricane deductibles to record retention, andother areas in between, these requirements need to be evaluated forpotential operational impact.

Insurers writing automobile insurance in New Hampshire have hadto modify their record retention schedules to accommodate the July1 revision for automobile rating and underwriting documentation.Regulation Ins 1404.01 now requires that insurers retain allrefusal to write, cancellation, and nonrenewal records, as well asall underwriting and rating documentation used to develop premiums,for five years. This is an additional year beyond the previousfour-year retention period.

Tennessee's bulletin issued June 29 addresses the newly enactedPublic Chapter No. 878 regarding policies issued to exemptcommercial risk policyholders. Effective on July 1, 2012,commercial risk insurance policies issued to an exempt commercialrisk policyholders are exempt from the pre-existing rate filingrequirements. That recent bulletin also served to provide aself-certification form required to be annually submitted (at thepolicy origination date and/or at renewal) to the Division by acommercial risk policyholder to qualify as an “exempt commercialrisk policyholder.” Applications or policies issued to an exemptcommercial risk policyholder must contain disclaimer language,which is also addressed in this bulletin.

On Aug. 2, Delaware enacted SB 202, which will now require allresidential property insurers to provide a clear and prominentnotice to residential property insurance policyholders about theexistence of deductibles for losses caused by wind, hail orhurricanes. Key compliance elements of this bill, which isapplicable to all residential property insurance policies issued orrenewed on or after Jan. 1, 2013, include:

• A clear disclosure of relevant details pertaining to thewind/hail and hurricane deductibles, including the trigger of thedeductible, regardless of whether it is stated as a percentage oras a dollar amount.
• An example of how a percentage deductible applies to the loss,if applicable.

The bulletin also mentions that this required notice may be sentelectronically to any policyholder who has consented to receivesuch notices in that manner.

While the Connecticut Insurance Department issued revised“Filing Review Guidelines Related to Underwriting CoastalHomeowners Insurance Policies” back on Dec. 9, 2011, that state'srecently enacted HB 5230 allows certain personal risk policiesissued or renewed on or after July 1, 2012 to include a hurricanedeductible. Insurers may impose a hurricane deductible instead of“an overall policy deductible during the period commencing with theissuance of a hurricane warning by the National Hurricane Center ofthe National Weather Service in any part of the state if suchhurricane results in a maximum sustained surface wind of 74 milesper hour or more for any part of this state.”

Colorado's recent Bulletin No. B-5.25 provides guidelines toinsurers issuing a premium increase, reduction in coverage,cancellation or nonrenewal notice of intended action, as a resultof single vehicle accidents.Coloradolaw prohibits an adverse actionas a result of a not-at-fault accident, and requires that insurersconduct reasonable investigations. The Division indicated toinsurers in this Bulletin that if it receives a complaintconcerning the company's determination of fault, that it willrequest one or more of the following pieces of information toassist in determining whether a reasonable investigation wasconducted:

• Adjuster's log notes
• Proof of claim payment
• Repair estimates and physical damage photos
• Police/accident reports
• Statements (either written or telephonic recording) from allinvolved parties/witnesses.

Michigan's HB 4594 is just one of a group of bills thislegislative session that provides the latest on the use of creditinformation in rating and underwriting. With an expected effectivedate in March of 2013, insurers will not be permitted to use creditinformation or an insurance score as any part of a decision todeny, cancel or nonrenew a personal insurance policy under chapters21, 24, and 26. However, credit information and an insurance scoremay be used to determine premium installment payment options andavailability.

The industry continues to deal with regulatory refinements andrequirements in the underwriting processes. Particular attention toboth effective dates and specific disclosures are key inmaintaining compliance in operations and ultimately mitigatingregulatory risk.