Utah Insurance
Industry
Newsletter
2006 Legislation
The 2006 Legislative Session ended Wednesday, March 1 at midnight. Throughout the session the department followed a number of insurance related bills, including our own. The following is a list and description of the bills that passed along with a link to the text of each bill. Legislation for the past five years can be found on our website at http://www.insurance.utah.gov/Legislation.html.
1. HB 17, Uninsured Motorist ID Database Program Amendments: Defines commercial motor vehicle insurance coverage; Requires the department to make rules; Reporting requirements for insurers and the Department of Motor Vehicle have been changed; The database is to be compared and updated twice a month for certain vehicles; etc.
2. HB 19, Identification Card Amendments: Persons over 21 with a disability and those over 65 may now extend their identification card five years rather than ten.
3. HB 32, Life Insurance and Annuity Law Amendments [Department Bill] The commissioner is allowed to make rules related to life policies, annuity contracts and certificates defining term, disclosure, exclusions or limitations, and clarifies the minimum amount of group life insurance that an insured may convert upon termination of a group life policy.
4. HB 33, Insurance Related Investment Amendments: [Department Bill] Property held by an insurer must be in his or her name; Permitted classes of investments are expanded, etc.
5. HB 34, Insurance Reports, Tables and Examination Amendments [Department Bill] Expands purposes for annual statement forms; Amends language regarding examination provisions, market regulation surveillance, conducting examinations, captive reporting requirements; and eliminates requirement to publish certain tables.
6. HB 72, Workers' Compensation for the State: As of July 1, 2007 state entities will be required to find workers' compensation coverage for their employees. The Workers' Compensation Fund will no longer be the state's workers' compensation carrier.
7. HB 76, High Deductible Health Plan Option for Public Employees: Public employees will be offered a high deductible health plan with a health savings account.
8. HB 150, Workers' Compensation Revisions: Changes have been made to the Workers Compensation Act and Occupational Disease Act regarding definitions, exclusive remedies, managed health care, accident and injury reduction programs, designated agents, jurisdiction of the commission, hospital services, and reporting requirements.
9. HB 156, Health Insurance Accessibility: Amends emergency care, policy exclusions, unmarried disabled dependents, and mini-Cobra coverages.
10. HB 199, Insurance Amendments - Adoption Indemnity Benefit: Establishes minimum adoption indemnity benefit requirements and does not prohibit an insurer from offering greater benefits.
11. HB 204, Comprehensive Health Insurance Pool Amendments: [Department Bill] Amends language regarding coinsurance and maximum out-of-pocket payments for prescription benefits.
12. HB 215, Public Employee Health Plan Risk Pool Administration: Allows institutions of higher education and independent government entities to participate in the Pool.
13. HB 233, Insurance Licensing Amendments: [Department Bill] Amends language regarding: Reporting requirements regarding administrative or criminal action against certain persons; Viatical reporting requirements; Title insurance agency license requirements; License revocation, suspension, surrender, lapse, probation, license types and classifications.
14. HB 242, Motorboat Liability Insurance Amendments: Defines motorboat; Requires owner to maintain owner's or operator's security.
15. HB 272, Insurance Law Amendments: [Department Bill] Expands immunity to authorized representatives of the commissioner; Clarifies taxation of a captive insurer and the voluntary dissolution of a domestic insurer; and Specifies that the Utah Life and Health Insurance Guaranty Association is not a state agency
16. HB 308, Insurance Policy and Contract Law: [Department Bill] Changes deal with insurance contracts in general and in specific lines, non-renewal of policies, and personal injury protection.
17. HB 403, Bailbonds Amendments: Changes were made to: the definition of "bail bond insurance;" forfeitures; posting of proof of surety bond; pleas in abeyance; suspended or deferred sentencing; court notification procedures when a defendant fails to post bail; procedures for forfeiting or reinstating a bond if a defendant misses a court date; procedure when a court enters a judgment in the surety's name; and procedures for a bond revocation.
18. SB 14, Insurance Department - Sunset Amendments and Revisions: Deletes sunset date for e-commerce fees and the time frame limiting when they are treated as dedicated credits.
19. SB 51, Driving with a Controlled Substance in the Body - Amendments: Modifies penalties when serious injuries are caused while operating a vehicle with a controlled substance in the body.
20. SB 115, Continuing Education in Insurance: Requires title producers who have been licensed at least 20 consecutive years to have six hours of CE with three in ethics.
21. SB 135, Inherent Risk of Skiing Amendments: Expands definition of "inherent risk of skiing" and more fully describes hazards associated with skiing.
22. SB 136, Tax on Insurance Premiums: Decreases tax rate paid by corporations on certain variable life insurance policies.
23. SB 186, Revocation of Death Benefits by Divorce: Repeals duplication.
24. SB 224, Motor Vehicle Insurance Amendment: Amends provisions relating to arbitration for uninsured and underinsured motorist coverage claims.
Consumer Complaints
The NAIC reports that nationally, the top three reasons for filing complaints against an insurer are the delay in claims payments, an unsatisfactory settlement amount and the denial of a claim. Following close behind are complaints about policy cancellations, premiums and rating issues. In 2005 consumers filed a total of 199,639 complaints throughout the United States and its territories. This was a decrease of 22.5% from 2004.
The Utah Insurance Department receives substantially fewer complaints than this of course. In 2004 we received 674 and in 2005 we received 713. In addition to complaints our consumer service representatives also responded to 11,457 inquiries in 2004 and 11,080 in 2005.
Issues before the Commissioner
D. Kent Michie
I thought you might be interested in a few of the issues I have been involved with over the last six months. All but the first mentioned are in their formative stages and will require more work before resolutions are achieved.
Deputy Commissioner Neal Gooch, Len Stillman of our Liquidation Office and I have been active participants in the National Association of Insurance Commissioner's (NAIC) process to finalize the Insurer Receivership Model Act (IRMA). The act is a comprehensive guide for taking an impaired or insolvent insurer through the rehabilitation and liquidation process. After five years of deliberation and debate the NAIC's Financial Condition (E) Committee, of which I am now the vice chair, has unanimously voted to recommend this act be adopted. The NAIC adopted IRMA at its meeting in Chicago in December, 2005. The Act will probably go before the Utah Legislature for consideration and possible adoption in the 2007 Regular Session.
Governor Huntsman has created the Working Group on the Uninsured, of which I am a co-chair. It is composed of representatives from other state agencies, medical provider associations, and the insurance industry. To kick this off the Governor held a full day summit in May of 2005. Since then the group has held meetings throughout the state to receive input from as many sources as possible. One of our goals is to cut the number of uninsured, estimated at 292,000, in half by 2010. We anticipate having a bill ready for the 2007 Legislature that will move us toward achieving that goal.
In November 2005, I, along with three other state insurance commissioners attended a major summit with other stakeholders to develop a national policy to cover damage from natural catastrophes. Such a policy would greatly reduce the need for emergency financial assistance and would help create an affordable, comprehensive policy. We need a comprehensive federal solution that would pre-fund catastrophic losses rather than funding them after the fact from the federal deficit. There is still much to do before a satisfactory plan and solution will be found on this issue.
Another issue that is critical to the health of our people in this state and in the nation is that of health care. In an effort to begin a much needed national dialogue on the rising cost of health care I have submitted to the NAIC a resolution asking that they call upon the President and Congress of the United States to establish by law a bipartisan national Commission on Comprehensive Health Care Reform. The commission would be charged with proposing solutions to: (i) increase access to insurance; (ii) create best practices in medicine; and (iii) reduce inflation in health care costs. This resolution will be submitted to the NAIC Summer National Meeting in June 2006.
Avian Bird Flu is a rising issue of concern worldwide. As of March 1, 2006 I prepared and forwarded Bulletin 2006-1 to the 1,387 licensed insurers doing business in Utah. I have requested that they consider the impact it will have on their financial strength and ability to promptly pay claims arising from the pandemic. Company management is strongly encouraged to include a discussion of these two issues when they file their annual report.
I will try to keep you up-to-date on these and other issues as they arise. I hope you will feel free to call the office if you have questions or issues that we may be able to help you with.
Fiduciary and Trust Obligations
Results of recent producer audits have revealed a misunderstanding of the fiduciary and trust obligations required of licensees. Section 31A-23a-409 requires that "...every licensee owes to insureds and insurers the fiduciary duties of a trustee with respect to money to be forwarded...."
Premiums collected by a licensee on bound or issued policies must be placed in a separate account identified as a “Trust Account.” The words “Trust Account” must be shown on all checks, statements, general ledgers and records retained for the accounting of trust monies. It is prohibited to commingle trust monies with other operating and/or personal funds. A trust account shall be separate and distinct from operating and personal accounts including separate account numbers, deposit and withdrawal slips, and account registers.
Bank statements for trust accounts shall be reconciled monthly. All accounts receivable and accounts payable from the trust account are to be properly identified and kept in accordance to the General Accepted Accounting Principles, GAAP, guidelines.
Fiduciary audits conducted by market conduct examiners will focus on trust obligations. Violators will be penalized and criminal acts referred to the Insurance Fraud Division for investigation and prosecution.
Licensees with questions regarding their fiduciary and trust obligations should carefully read Section 31A-23a-409, Trust obligation for funds collected, and Rule R590-170, Fiduciary and Trust Account Obligations.
Department Changes
As of March 13th the department formed a Market Conduct Division and brought together under one director the Life Division and the Property and Casualty Division.
The creation of a Market Conduct Division will bring together the eight market conduct examiners from the Life, Property and Casualty, Health and Licensing Divisions under the guidance of one director. This follows a trend spreading throughout the other insurance departments nationally. This move will improve the coordination of investigations and administrative actions.
Left: Directors Randy Overstreet, Brad Tibbitts, Darrel Powell.Darrel Powell, CPCU, has been appointed director of the new Market Conduct Division. He has been with the department five months and was previously the director of the Producer Licensing Division. Prior to coming to work for the department Darrel worked with a large property-casualty insurance company for 25 years and earned his CPCU designation.
Randy Overstreet, CIE, FLMI, has been appointed to replace Mr. Powell as the director of the Producer Licensing Division. Randy has been with the department 15 years as a market conduct examiner/investigator. He has also been serving as the Utah chair of the Insurance Regulatory Examiners Society, or IRES since December 2002.
The Life Division will now be combined with the Property and Casualty Division under the direction of Brad Tibbitts. Brad has been the director of the Property and Casualty Division for the past five and half years and has been with the department since 1998. Prior to combining the two divisions, John Coomans served as director of the Life Division until his retirement in December of 2005.
Department sends help
to New Orleans
After the devastation caused by Hurricane Katrina the Louisiana Insurance Department issued a call for help to process complaints and fill in where they were short-handed. In the beginning they received 800 to 900 calls a day, seven days a week. To handle the increased volume 23 additional phones were installed and people displaced by the hurricane were hired to answer them. The influx of call and complaints was so great that at one point they had 47,000 backlogged complaints. As of February 18 that number had been reduced to 7,000.
So far the Utah Insurance Department has sent five employees to the Louisiana Department to help where needed, Sandy Glaze, Randy Overstreet, Robert Herrera, Linda Hardman and Al Kieffer. Some have helped out in the disaster recovery center field offices in New Orleans, of which there are twelve, and some have helped at the Louisiana Insurance Department in Baton Rouge.
Out of necessity the Louisiana Department IT people created a complaint filing procedure to enhance and speed up the process and meet increased demands. The system allows people to file complaints on line. These complaints are reviewed by the department and forwarded electronically to assigned company personnel. Issues that need to be discussed between the company and the department are done via instant messaging. Companies are required to respond within five days of receiving a complaint.
As you might imagine, people who lost everything in the hurricane also lost insurance documents. Many who have not been able to remember who their insurance is with have contacted the department for help. Their names have been sent to insurers in an email "Blast" to find out who insures them. These "Blasts" have been very effective.
Another problem that has slowed the claims process is determining if the water or the wind caused the damage. Usually they are covered under different policies, requiring an adjuster from each company. The rule of thumb has become, everything below the water line is water damage and everything above is wind.
During his stay in February Randy took over 400 pictures of the New Orleans area. His overall impression was that it looked like the hurricane had just hit. Devastation was everywhere. Most homes were uninhabited and curfews still in place in most neighborhoods. Here are two of the pictures he took that represent the damage he saw.
NAIC Committee Assignments
The National Association of Insurance Commissioners (NAIC) named their committee chairs for 2006. The association is constantly shaping strong policies to improve the insurance regulatory system. Commissioner Kent Michie has been selected as vice chair of the Financial Condition (E) Committee. A complete listing of committee assignments can be found at: http://www.naic.org/documents/committees_cmtelist.pdf.
Enforcement action against licensees
Rule Update
New web page
Title & Escrow Commission (on welcome page)
Get Smart About Insurance (Redone. Consumer oriented)
