(Editor's Note: Kathy Donovan is senior compliance counselfor Insurance Compliance Solutions at Wolters Kluwer FinancialServices and a regular contributor to PC360.) 

The end of yet another year gives all of us an opportunity toreview recent legislative and regulatory initiatives and then pauseto consider what the next year might bring. As one would expect,2012 most definitely provided property and casualty (P&C)insurance compliance professionals many new and revisedrequirements across multiple functional areas. A quick recap ofsome key updates can assist in identifying the current legislativeand regulatory focus and perhaps provide some insight into what2013 may have in store. 

Underwriting Undergoes Changes
Insurers'underwriting departments, of course, deal with many existingrequirements, which often vary widely from state to state. Addingto those requirements are new ones such as those included inCalifornia's AB 2303. Beginning Jan. 1, 2013, the state haseffectively deleted the "new business" underwriting period forpersonal automobile insurance as it pertains to permitted reasonsto cancel such a policy. Insurers will now be restricted to usingthe specific reasons listed in Ins. §661 when issuing acancellation notice for a policy which has been in existence forless than 60 days. 

An upcoming requirement in Washington will affect propertyinsurance cancellations and nonrenewals. Effective April 1, 2013,WAC 284-19-170 will require more information be provided to theinsured when an insurer cancels or nonrenews a property insurancepolicy. Currently, insurers must explain the procedure for makingapplication under the Washington Essential Property InsuranceInspection and Placement Program either in the notice ofcancellation or nonrenewal or accompanying such notice. The newmandate requires that the notice of cancellation or refusal torenew must include:

• Contact information for the office of the Washingtonstate insurance commissioner's consumer-protection services,including the consumer-protection division's hotline phone numberand the agency's website address.

• A statement that the consumer may contact the officeof the insurance commissioner for assistance with questions orcomplaints. 

An upcoming notice requirement in Delaware affects all insurerswriting residential property insurance under SB 202. A clear andprominent notice must be provided to such policyholders as to theexistence of deductibles for losses caused by wind, hail orhurricanes on or after Jan. 1, 2013. Insurers must discloserelevant details pertaining to the wind, hail and hurricanedeductibles, including the trigger of the deductible, regardless ofwhether it is stated as a percentage or as a dollaramount. 

However, if the insurer does use a percentage deductible, thenit must provide an example of how it applies to the loss. This newnotice requirement applies to each newly issued policy and also tothe first renewal after any insurer-initiated change in deductiblesfor losses caused by wind, hail or hurricanes. 

Credit Score Information Challenges "Not asHot" 
For the past few years, it was notuncommon to see close to half of the states with introducedlegislation proposing to restrict or ban the use of creditinformation in one or more lines of business. However, this yearthere were substantially fewer states that filed bills advocatingsuch actions. An example of such a bill was Missouri's HB 1406,which failed to pass. It was drafted to prohibit an insurer fromusing a credit report or insurance credit score as a factor inunderwriting or to take any adverse action based on a credit reportor insurance credit score against a person currently insured underan existing insurance contract with the insurer. 

One bill that was enacted was Michigan's HB 4595, with ananticipated effective date of March 20, 2013. Under this bill, whenrequested by an insured or an applicant, an insurer is required toprovide reasonable exceptions to its use of credit information inthe insurer's rates, rating classifications, or company or tierplacement for an individual who has experienced and whose creditinformation has been directly influenced by extraordinary lifecircumstances. Additionally, HB 4596 requires that an insurer, uponreceiving notice, must reevaluate its evaluation of an insured'scredit score information if the established dispute-resolutionprocess determines that the initial evaluation was based onincorrect or incomplete credit information and make necessaryadjustments. This second bill also has an expected effective dateof March 20, 2013.

Managing Claims Revisions
From new fraudwarning statement requirements in Alabama and Maryland to noticesand disclosures, states continued to mandate additional provisions.West Virginia' HB 4486, effective June 8, requires an insurancecompany to provide a response that includes the name of theinsurer, the name of each insured on the policy, the limits of anymotor vehicle liability, and the declaration page within 30 days ofreceipt of a written request from the claimant'sattorney. 

New Hampshire's Administrative Rule Ins 1002.08, effective Dec.1, 2012 requires that when insurers pay P&C insurance claims,the form of payment must allow the claimant or the insured readyaccess to claims funds. Insurers do have options available toaffect a compliant payment, including using a paper check or draft;direct deposit to a claimant's or an insured's financial accountwith prior verifiable authorization of the insured or claimant; ordelivery of a debit card, bank card or other similar card. Thislatter option has specific disclosure requirements to which theinsurer must adhere. 

States routinely update "pieces" of the legislative andregulatory requirements applicable to workers' compensationinsurers every year. As a result, workers' compensation insurersmust deal with a fairly steady flow of updates to theirunderwriting and claims processes. These updates occur without anymajor reform at the state level, as these changes are oftencentered on claims issues including mileage reimbursement rates,appeals processes and benefits payable. Workers' compensation isalso a very forms-dependent line of business. In addition to allthe legislative and regulatory changes, nearly 300 state-mandatedworkers' compensation claims and miscellaneous forms were revisedor newly created since the beginning of the year. 

Apart from the routine processing of claims, complete with thetimely claims-handling and disclosure requirements, insurers mustalso contend with the changing state statute of limitations. Ohiorevised its contract statute of limitations for an action broughtupon a specialty or an agreement, contract or promise in writing,decreasing it from 15 to eight years after the cause of actionoccurred. Wyoming's HB 14, which was effective July 1, 2012,revised the limitation period for a medical-malpracticewrongful-death claim to mandate tolling of the action upon receiptby the director of the medical-review panel of a malpractice claim.Vermont's HB 766 provides that effective July 1,the limitations period for a cause of action by or against a memberof the National Guard will be tolled during the duration of his orher out-of-state military or naval service or in-state active-dutyservice, plus an additional 60 days. 

"Electronics"Initiatives 
Our electronic age affectsinsurers' regulatory environment, with the impact evidenced by theadvances many states have made in establishing requirements forboth portable electronics insurance and the regulatoryacceptability of an image of a motor vehicle identification cardthat is displayed on a wireless communication device. Statesenacting portable electronics provisions this year include Alabama,Arizona, Colorado, Delaware, Hawaii, Idaho, Indiana, Kentucky,Louisiana, Nevada, New Hampshire, New Jersey, Pennsylvania, RhodeIsland, South Carolina, South Dakota, Utah, Vermont, Washington andWisconsin. In addition, other states, including Illinois, Kansas,Maryland, Minnesota, Missouri, Oklahoma and Oregon continued torefine previously enacted requirements. 

While portable electronics insurance requirements have beenfeatured in other states in recent years, a more recent developmenthas been the adoption of an alternate electronic proof of insuranceas we saw this year in Arizona, California and Idaho. Whileinsurers are not required to provide insureds with this electronicproof, they are permitted to do so. For example, Idaho's SB 1319provides that the certificate or proof of liability insurance maybe produced in either paper or electronic format, with the latterincluding displays of electronic images on a cellular phone or anyother type of portable electronic device.

Looking Ahead
The coming year promises toprovide us with more legislative proposals aligned with providingadditional consumer protection in the areas of underwriting andclaims, whether these take the form of mandated consideration ofextraordinary life events when using credit information in ratingand/or underwriting or additional disclosures or consumerdisclosures when using alternate forms of payment in claimsprocessing. Given the electronics-driven environment, it also wouldnot be unexpected to see more states opt for the "new age" displayof evidence of financial responsibility on an electronicdevice. 

Regardless of the ultimate enactment and adoption of thesoon-to-be-introduced bills and regulatory proposals, P&Cinsurance compliance professionals will most definitely havechallenges to address and evaluate as we meet 2013.