With so much legislative and regulatory activity each year, property and casualty insurers can always count on plenty of tracking and implementation issues. Some of the perennial topics that are addressed and find their way to enactment or adoption are those impacting claims and trade practices—and 2011 has been no exception.

A quick look at some total-loss developments this year

Certainly an area of continuing interest in claims processing is total-loss settlements. Rhode Island's HB 5894, effective Oct. 1, 2011, deletes the current exemption from sales tax of proceeds applicable to total-loss motor-vehicle insurance settlements. After that date, total-loss claimants will have to pay sales tax on the full value of replacement vehicles. Insurers are directed in Bulletin 2011-04, as amended, to include the state sales tax, currently set at 7 percent, in calculations of total-loss claim payments.

Arkansas' HB 1371, effective July 26, 2011, provides that if an insurer makes a total-loss settlement on a motor vehicle, the owner or lienholder of the motor vehicle is required to forward the properly endorsed certificate of title to the insurer within 15 days after receipt of the settlement. However, if an insurer is unable to obtain the requisite certificate of title within 30 days after paying the total loss for a motor vehicle that does not have a lien or encumbrance, the insurer is permitted to request that the Office of Motor Vehicle of the Revenue Division of the Department of Finance and Administration issue a salvage certificate of title or a parts-only certificate of title for the vehicle. Specifications for the format of the insurer's request, as well as settlement documentation requirements, are also included.

Nevada's SB 142, effective Oct. 1, 2011, allows for an insurer to take possession of a motor vehicle from a tow-car operator so long as the insurer provides the operator with a proper consent form. The insurance commissioner is required to adopt a standard consent form to be used for this purpose. Additionally, this bill provides that the owner of the vehicle is deemed as having given consent for the insurer to:

Tow and store the vehicle at the insurer's expense if the insurer provides notice to the owner that it has declared the vehicle a total loss.
Tow the vehicle to a repair shop designated by the owner if the vehicle is a repairable vehicle.

Vermont's Insurance Division Bulletin #162 seeks to clarify the role of third-party vendors—and the responsibilities of insurers using vendors—and to give insurers guidance on the requirements of Regulation 79-2 with regard to total-loss settlements. The division's clarification also reminds the industry that while a third-party vendor can be used to collect information, this practice does not waive an insurer's or adjuster's responsibility to adjust claims and to ensure that the information used is in compliance with the regulation.

It's not just total losses

While total-loss-settlement requirements are critical to an insurer's overall compliant processes, there are other claims-requirement developments that bear mention. Minnesota's SF 508 added subdivision 17 to 72A.201, which became effective Aug. 1, 2011. It specifies that if an insured is making a claim under collision or comprehensive coverage that includes rental-vehicle-reimbursement coverage, the insured has a right to select any rental-vehicle company. Coupled with this consumer right is an insurer responsibility if the insurer recommends a rental-vehicle company to its insured. The insured must also receive the following advisory: “Minnesota law gives you the right to choose any rental-vehicle company and prohibits me from requiring you to choose a particular vendor.”

Vermont's Bulletin #164 provides the industry clarification when dealing with automobile claims made for diminished value. Specifically included in this clarification was the following: “When evaluating such diminished value claims, insurers must take into account all relevant information which would include, but not be limited to, all relevant information provided by an insured or third-party claimant regarding a claim for diminution of value. While the department has not mandated a particular method for adjusting such claims, insurers must be able to articulate a fair and equitable process and standards for such an adjustment.”

Trade practices: This regulatory interest continues

Arkansas' Directive 2-2011 reminds insurers that the giving of any gift as an inducement to make inquiry about, to purchase or to renew insurance is prohibited under Arkansas law. However, the directive does acknowledge exceptions when it comes to “token gifts,” defined as those less than $25.

North Dakota amended its list of prohibited practices in the business of insurance effective Aug. 1, 2011. SB 2237 further defines the prohibition against making or permitting any unfair discrimination to include consideration of an individual's history or status as a subject of domestic abuse.

As you can see, property and casualty insurers must incorporate many moving parts into their policies and procedures to ensure compliance with state laws. And in any given year, we can be sure that legislative and regulatory changes can, and most likely will, impact these operational areas. Careful monitoring of these changes generally allows for longer lead times to address the implementation of any required modifications to insurers' policies and procedures.

Special Reports /

Claims and Trade Practices: Attention-Getters All Around!

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