Ethics and Compliance - Going Above the Bottom Line

A Nebraska notice tells of plans to adopt an amended NAC Title 210 Chapter 56 to bring the state’s requirements for annual audited financial reports in line with the NAIC’s model audit rule.

A bill being considered in the Maine legislature would create a new private right of action against insurers for third-party claimants. But two trade groups says the bill isn’t needed. Paul Tetrault, Northeast state affairs manager for the National Association of Mutual Insurance Companies, called LD 1305 “a wholly unwarranted, reckless, and dangerous expansion of existing law that would have a dramatically negative effect on the insurance claims process and lead to a substantial increase in costly litigation. Meanwhile, John Murphy, northeast region vice president for the American Insurance Association, says the state’s unfair claims settlement practices laws already give the insurance superintendent the authority to enforce corrective procedures and to levy fines upon insurers for misconduct towards a third-party.

Kansas SB 44 is a state false claims act that allows the state attorney general to bring civil suits against individuals and businesses that have defrauded state programs. Courts could award the state treble damages. The law also protects whistleblowers who may assist the state. More than 20 states have enacted false claims acts.

The Texas Senate has approved SB 375, which would delete certain personal identifying info like telephone numbers from police vehicle accident reports. The bill is part of a package supported by the Texas Committee on Insurance Fraud and the Coalition Against Insurance Fraud to restrict access to the reports. A House committee now is considering the measure.

The Missouri Senate has approved SB 335 that targets phony auto insurance cards. Making or selling bogus cards would be a felony and possession would be a misdemeanor. The House is considering a similar companion measure, HB 735.

Nebraska says in a notice it is proposing to adopt an amended NAC Title 210 Chapter 71 dealing with the valuation of life insurance policies. Chapter 71 established the means to calculate deficiency reserves by allowing life insurers to adjust valuation mortality by their experience through the use of an “X” factor that they apply to the valuation mortality, and correct numbering and typographical errors. The proposed amendment would remove the artificial “X” factor restrictions (20-percent floor and non-decreasing requirements) from the required deficiency reserve calculation.

New Jersey Bulletin 09-12 provide more direction about a state law that recently went into effect that provides marketing, information disclosure and product suitability requirements for all current and future issues of individual fixed deferred and immediate annuity contracts solicited directly to consumers. Earlier guidance in Bulletin 09-06, which remains in effect, addressed the new law; this bulletin further clarifies the Insurance Department’s interpretation of the law.

A Nebraska notice tells of the state’s intention to adopt an amended NAC Title 210 Chapter 36, which governs Medicare supplement insurance policies. The proposed amendments would put the current regulation in compliance with the Medicare Modernization Act of 2003, the Medicare Improvements for Patients and Providers Act of 2008 and the Genetic Information Nondiscrimination Act of 2008, along with changes to the NAIC’s Medigap model. The amendments will create two new Medicare supplement plans, and eventually eliminate the prescription drug benefit for the Medicare supplement plans.

Idaho wants producers to exercise more care when having customers sign “producer of record” letters. Bulletin 09-04 notes that some producers have been obtaining the signatures of insureds on “producer of record” letters without fully explaining the legal effect or intended use of the letter. In some cases, the letter may have been improperly represented as necessary simply to obtain a rate quote for comparison purposes. In other cases, key information may have been added into a “producer of record” letter by a producer after the insured has signed it. The bulletin has several general guidelines for the use of “producer of record” letters.

• Effective Jan. 6, 2009, Public Act 422 of 2008 amends MCL 500.1205(1) to deny the approval of a resident producer individual or business entity application if the applicant committed any act listed in section 1239(1).

• Effective Jan. 6, 2009, Public Act 423 of 2008 amends MCL 500.1239(1) to require the commissioner to deny a producer license to applicants who have committed one of the acts identified in the section.

• Effective Jan. 1, 2010, Public Act 574 of 2008 amends MCL 500.1204b and 1204c to delete the current insurance producer and solicitor continuing education license continuation (review date) schedule and allow the commissioner to establish a new schedule. Active licensees will be contacted and provided with the new CE review date schedule. The act also revises the makeup of the Insurance Agent Education Advisory Council.

• Effective July 16, Public Act 575 of 2008 amends MCL 500.1204a to revise the required number of insurance producer and solicitor prelicensing education hours to 20 per line of authority for accident & health, life, property, casualty and personal lines, in compliance with the NAIC Producer Licensing Model Act. Prelicensing education is not required for variable annuities or minor lines.

• Effective Jan. 13, Public Act 494 of 2008 adds MCL 500.1206c requiring the commissioner to report insurance producer life and health examinee statistics annually.

Maryland Bulletin 09-09 says the Insurance Administration will require insurers to use a new on-line reporting tool to report medical malpractice closed claim information. Insurers must use the new survey tool starting July 1, when the current tool will no longer be available. Carriers can use the existing one until then, but the state wants companies to begin using the new survey tool as soon as possible.

New Jersey is proposing to adopt an amended NJAC 11:1-7.3. It would eliminate the requirement to report claim or settlement payments when there is a finding or verdict of no liability on the part of the practitioner. Insurers would still have to report all claim payments, including payments on claims that are not to be reported to the Review Panel under the proposed amendment, to the Insurance Department pursuant to current rules. Comments about the proposal are due by June 19.

New York Supplement 1 to Circular Letter 23 (2008) provides more clarity about mid-term cancellation of policies based on a residence becoming unoccupied. It addresses vacant and unoccupied properties, whether absence from a property constitutes “change” under insurance law, exclusions based on vacancy or lack of occupancy, and foreclosures.

Rhode Island wants property/casualty insurers to update information about their primary contact person who is notified when a catastrophic event is declared. Details are in Bulletin 2009-4.

Connecticut Bulletin IC-22 reminds the insurance industry of its responsibility to take affirmative steps to avoid contributing to the loss of public confidence and irrational behavior. Though it is acceptable for companies and their representatives to reference their financial strength, it is not acceptable, and is likely a violation of Connecticut law, for companies or their representatives to make unfair or misleading statements, implications or innuendos about the financial condition or solvency of other companies. The bulletin lists a number of unfair and deceptive business practices and suggests that companies share them and the rest of the bulletin with their producers.

Utah is proposing a new rule, R590-244, that would proscribe license renewal and reinstatement requirements for individual and agency licensees. A hearing is scheduled for June 4.