Filed Under:Claims, Catastrophe & Restoration

Underwriting Processes In Focus

Staying Current with the Latest Requirements

Some states have been busy this year adopting new and revised requirements impacting insurers’ underwriting processes. From credit scoring to hurricane deductibles to record retention, and other areas in between, these requirements need to be evaluated for potential operational impact.

Insurers writing automobile insurance in New Hampshire have had to modify their record retention schedules to accommodate the July 1 revision for automobile rating and underwriting documentation. Regulation Ins 1404.01 now requires that insurers retain all refusal to write, cancellation, and nonrenewal records, as well as all underwriting and rating documentation used to develop premiums, for five years. This is an additional year beyond the previous four-year retention period.

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

On Aug. 2, Delaware enacted SB 202, which will now require all residential property insurers to provide a clear and prominent notice to residential property insurance policyholders about the existence of deductibles for losses caused by wind, hail or hurricanes. Key compliance elements of this bill, which is applicable to all residential property insurance policies issued or renewed on or after Jan. 1, 2013, include:  

  • A clear disclosure of relevant details pertaining to the wind/hail and hurricane deductibles, including the trigger of the deductible, regardless of whether it is stated as a percentage or as 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 sent electronically to any policyholder who has consented to receive such notices in that manner.

While the Connecticut Insurance Department issued revised “Filing Review Guidelines Related to Underwriting Coastal Homeowners Insurance Policies” back on Dec. 9, 2011, that state’s recently enacted HB 5230 allows certain personal risk policies issued or renewed on or after July 1, 2012 to include a hurricane deductible. Insurers may impose a hurricane deductible instead of “an overall policy deductible during the period commencing with the issuance of a hurricane warning by the National Hurricane Center of the National Weather Service in any part of the state if such hurricane results in a maximum sustained surface wind of 74 miles per hour or more for any part of this state.”

Colorado’s recent Bulletin No. B-5.25 provides guidelines to insurers issuing a premium increase, reduction in coverage, cancellation or nonrenewal notice of intended action, as a result of single vehicle accidents.Coloradolaw prohibits an adverse action as a result of a not-at-fault accident, and requires that insurers conduct reasonable investigations. The Division indicated to insurers in this Bulletin that if it receives a complaint concerning the company’s determination of fault, that it will request one or more of the following pieces of information to assist in determining whether a reasonable investigation was conducted:

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

Michigan’s HB 4594 is just one of a group of bills this legislative session that provides the latest on the use of credit information in rating and underwriting. With an expected effective date in March of 2013, insurers will not be permitted to use credit information or an insurance score as any part of a decision to deny, cancel or nonrenew a personal insurance policy under chapters 21, 24, and 26. However, credit information and an insurance score may be used to determine premium installment payment options and availability.

The industry continues to deal with regulatory refinements and requirements in the underwriting processes. Particular attention to both effective dates and specific disclosures are key in maintaining compliance in operations and ultimately mitigating regulatory risk.

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