Ethics and Compliance - Going Above the Bottom Line

• Washington has submitted a Preproposal Statement of Inquiry to amend its existing regulatory standards to bring them in line with NAIC’s Model Regulation to Define Standards and Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition. The exact wording of the changes haven’t been specified. Comments can be submitted through Aug. 17 using an online form for the rule or by sending an email message to Kacy Scott.

New York Circular Letter 11 (2009) provides the state’s expectations for complying with three federal AML laws – and puts companies on notices that, as part of its future examination processes, the Insurance Department may review the compliance function and interview senior management to determine how well companies are assessing the risks of money laundering, bribery of foreign persons and federal economic sanctions. As the department sees things, enforcement rests with federal authorities, but compliance with the laws goes hand-in-hand with prudent risk management.

Four property/casualty trade associations are putting their support behind California AB 1200. It would allow would authorize an insurer to provide a claimant with information about the repair costs, warranties and other benefits available under a policy. That information could include, but wouldn’t be limited to, information about the repair warranties offered, the type of replacement parts to be used, the anticipated time to repair the damaged vehicle and the quality of the workmanship available to the claimant. Supporting the bill are the Personal Insurance Federation of California, the Association of California Insurance Companies, the American Insurance Association and the Pacific Association of Domestic Insurance Companies. They represent more than 95 percent of auto insurers doing business in California.

New York Circular Letter 15 (2009) reminds insurers they must file an annual informational return with the New York State Department of Taxation and Finance if they pay consideration or an amount under an insurance contract for the servicing or repair of a motor vehicle on behalf of an insured. The law also requires insurers to advise recipients of such payments, including motor vehicle body or mechanical repair shops as sales tax vendors, of the information reported to the tax department. The first informational return required under this law is due on Sept. 20, and will cover the period March 1 to Aug. 31. The tax office is expected to issue written guidance explaining the filing process and clarifying the information required.

Texas has two deadlines for its 2008 annual aggregate closed claim data call. Insurers must return an acknowledgment of receipt by July 15 and the data call report by Aug. 17. The data call forms are online.

Louisiana says in a July 1 notice that it has rescinded Directive 200, Coverage and Reimbursement for Health Care Services Rendered in a Medical Emergency. The state will expect insurers to continue to follow the applicable laws and regulation that govern coverage and reimbursement for health care services.

• Section 4509 now applies only to group insurance issued to employers with fewer than 20 employees which is not subject to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), and to prepaid health plans and HMO contracts issued to non-COBRA eligible groups.

• A new subsection, 4509(d) creates a continuation right comparable to COBRA. This “mini COBRA” program allows employees or their dependents who have lost coverage to continue their group health insurance for up to four months when the employee has been involuntarily terminated. The new subsection allows them to be eligible for a premium subsidy made available by the American Recovery and Reinvestment Act of 2009.

Oregon has amended Medicare supplement insurance rules to conform to changes in federal law and the NAIC Model Regulation to Implement Revisions to the NAIC Medicare Supplement Insurance Minimum Standards Model Act. The order, which was effective July 1, amends OAR 836-052-0119, -0129, -0133, -0134 and -0142 and adopts OAR 836-052-0132, -0141 and -0192.

Utah has new and amended health insurance rules that went into effect July 1. Details are in a new rule, R590-253, Utah Mini-COBRA Notification Rule, and in amended rule R590-247, Universal Health Insurance Application Rule.

Minnesota has enacted SF 2082, omnibus legislation that includes a false claims section targeting crooks who defraud state programs such as public health insurance. Whistleblowers can sue suspected wrongdoers, and receive a percentage of any settlement. They’re also protected against employer retaliation. Minnesota joins more than 20 other states that have enacted false claims acts.

State insurance legislators plan to consider a model airbag law next week in Philadelphia, reports the Coalition Against Insurance Fraud. The airbag model takes a holistic approach by:

• allowing manslaughter charges for installing a phony airbag if someone is seriously injured or dies because of a lack of a viable airbag. Vermont and Florida have manslaughter penalties.

• Rule 17 requires insurers to deliver a buyer’s guide and other clear and unambiguous information that will help the buyer select the most appropriate plan of life insurance. Insurers can continue to use additional sales material that doesn’t violate state rules.

• Rule 82 has standards and procedures for recommendations that result in a transaction involving annuity products. The intent is to make sure the producer appropriately addresses insurance needs and financial objectives at the time of the sale.

• Rule 98 addresses the disclosure of certain minimum information about annuity contracts, including a buyer’s guide. It specifies which minimum information must be disclosed and the method for disclosing it.

Oregon Bulletin INS 2009-06 updates filing procedures for all advertisements, sales and marketing materials used by life insurers, annuity insurers and producers. It also withdraws Bulletins INS 2000-2 and INS 2009-3.

Texas HB 1919, in determining the value of benefits, now considers the maturity date to be the latest date on which an election is permitted by the contract, but not later than the later date of:

The law applies only to an annuity that is delivered, issued for delivery, or renewed on or after June 1, 2010. Annuities in place before then are to be governed by the law as it existed immediately before the effective date of the law.

Texas HB 4492 says that compliance with the conduct rules of the Financial Industry Regulatory Authority relating to suitability, or the rules of another national organization recognized by the commissioner, satisfies the requirements for recommending annuities registered under the Securities Act of 1933.

The NAIC has released a new draft of proposed revisions to the Suitability in Annuity Transactions Model Regulation. The revisions reflect the discussion at the Suitability of Annuity Sales (A) Working Group meetings at the NAIC’s summer national meeting. Comments are being requested by Aug. 7.

• The Insurance Division will no longer send paper renewal reminder notices (although it will, upon request, send a reminder to the last known email address in its records).

• It will also no longer print or mail licenses, but one may be printed for no fee from the division’s Web site using the State-Based Systems (SBS) Connect link.

• It will use the Attachments Warehouse, which receives and shares license information through the National Insurance Producer Registry. The Insurance Division is accepting the electronic notification and reporting of actions submitted electronically to the Attachments Warehouse as satisfying the requirement of the producer to notify and report the action to the Insurance Division.

A recent Michigan memorandum tells of changes in state law that provide for a change in continuing education review dates. The new CE review date will be based on the month and year of a producer’s birth. Licensees with dates of birth in odd years will have CE due the first day of their birth month every two years in all odd years; deadlines for others will be in even-numbered years. The change will take effect Jan. 1, 2010.

Texas Bulletin B-0030-09 reminds producers of their duties and responsibilities for submitting applications and premiums to the Texas Windstorm Insurance Association. Regulators say the application submission process can be especially critical during hurricane season because the TWIA won’t provide coverage until the application, all required documentation and the full premium is received. Agents who do not promptly and properly submit the applications and premiums may be subject to a civil lawsuit for damages by aggrieved parties or to disciplinary action by the Insurance Department.

Florida SB 742 authorizes an insurer offering sinkhole coverage to nonrenew a policy in Pasco and Hernando counties, and to provide coverage which includes catastrophic ground cover collapse and excludes sinkhole coverage. It becomes law Jan. 1, 2010.

Rhode Island SB 231 provides for the application of the hurricane deductible for losses at Block Island when hurricane force sustained winds are reported by the National Weather Service at that location. To apply the hurricane deductible in the remainder of the state, losses are due to a hurricane when a hurricane results in hurricane force sustained winds as reported by the National Weather Service for any other location in the state.

Federal legislation addressing the Medicare Secondary Payer Reporting mandate became effective July 1. The Centers for Medicare & Medicaid Services have established reporting requirements for liability insurance, no-fault insurance and workers’ compensation insurance, and also include automobile, homeowners and commercial plans (including self-insurance). Insurers will face a fine of $1,000 per day per reportable Medicare claim if claims aren’t reported correctly or in a timely manner. The new reporting rules do not eliminate any existing statutory provisions or regulations.

The Association of Insurance Compliance Professionals has passed along a notice that the Connecticut Insurance Department will no longer allow form filings or underwriting guidelines to be submitted in combination with rate or rule filings. It says the change will give the department more flexibility to assign examiners to review filings and, possibly, expedite all property/casualty filing reviews. We couldn’t confirm that independently before the holiday weekend, but you can get more information from Moira Herbert, moira.herbert@ct.gov, at the Property and Casualty Division of the Connecticut Insurance Department.

Alaska HB 93 makes it a state crime to place sales calls to cellular or mobile telephones registered with the national do-not-call registry. It goes into effect Sept. 14.

North Carolina HB 686 changes notice requirements for telephone subscribers who want to stop unwanted telephone solicitations and for consumers who enter into telemarketing transactions.

Washington proposed rule WAC 284-02-070 would adopt the Washington Civil Rules of Procedure without change for use in adjudicative hearings and contested cases before the Office of the Insurance Commissioner. Comments about the rule must be provided by Sept. 1. Comments can be submitted using an online form for the rule or by sending an email message to Kacy Scott.