October 2007
Utah Insurance
Industry
Newsletter
Contents:
If you are an employer, producer, third party administrator or insurer with questions about the new HIPAA and COBRA laws, this is your chance to ask the experts. A 2-day seminar has been scheduled for December 11 & 12, 2007. It will begin at 8:00a.m. in the Radisson Hotel, 215 W. Temple, Salt Lake City, Tel. (801)-531-7500.
Please note that the seminar will be free to the first 100 applicants.
Both federal and Utah state regulators will be on hand to bring you practical information, helpful tips, and clarification regarding Utah and federal health benefit laws. Representatives will be available from the:
U.S. Department of Labor
Utah Insurance Department
Utah Department of Health & Human Services
Internal Revenue ServicesTo obtain a copy of the pamphlet and register click on the following link.
As of September 12, 2007 the department has domesticated 40 captive insurers, and more are considering the move here. The number of captives has grown from 1 in 2003 to 14 by the end of 2005 and 30 by the end of 2006.
Come December 31 we will see if we continue that trend. Either way we are one of the fastest, if not fastest growing domestic captive market in the Union.In June the highly respected international captive magazine, Captive & Art Review, wrote a complimentary two-page article about our Captive Division. It highlighted a few of the reasons for our growth.
To begin with, in 2004, Utah's Governor Jon M. Huntsman and Insurance Commissioner Kent Michie put their political weight behind a bill abolishing the premium tax for captive insurers.
In addition, Donnie Spann, the director of the Captive Division, noted that, "If you have a good infrastructure, people will realize you are serious about your captive program." A big part of our infrastructure is Eric Showgren. He is an experienced, street-smart financial examiner who oversees the application process, making recommendations to Donnie. To date any correctly filed application has been guaranteed a turnaround time of two weeks or less. Even through the hectic last two weeks of 2006, when the Captive Division received seven new applications, Eric was able to stay within that turn-around-time. To maintain their peak performance Donnie is beating the bushes for another examiner.
According to Donnie, "The State of Utah has a lot to offer prospective captive owners: a young, educated, technology-savvy workforce; thriving tourism; recreational industries; financial services; and so much more."
The Captive Division has its own website at http://www.captive.utah.gov/ if you want to learn more.
The 2007 codebooks are in. They are composed of 1006 pages of current Utah insurance laws, rules, bulletins and related laws. You NEED this book! It will help you stay in compliance with the law and provide your customers with reliable guidance and support. And, unlike everything else, the price remains the same as the past two years, $40. That's 4 cents per page.
To get one now, just call, 801-538-3803 or click on this link to our website at, https://secure.utah.gov/uidscart/uid_shopping. In either case, have your credit card ready. Or, you can send your check by snail mail to:
Utah Insurance Department
State Office Building, Room 3112
Salt Lake City, UT 84114-6901
You should receive the book within 10 days of our receiving your payment.
Rear row left to right; Gale Lemmon, Robert Herrera, Angie Thomas,
Sheila Curtis, Nancy Askerlund, William Stimpson, Sandy Halladay,
and Brian Hanson. Front left to right; Gerri Jones, Darrel Powell
(director) and Tara Buehner.
"We appreciate your effort to come to our area."
"...thank-you for going the extra mile in getting to know us and allowing us the opportunity to learn about your department."
"...I will be able to use the information that I have learned from your class to educate my staff/fellow employees."
These are three of the comments received by the department in response to the continuing education (CE) classes taught by our market conduct examiners.
One of the major purposes of these classes has been to accomplish Commissioner Michie's goal to promote good will and provide educational opportunities for department licensees. To date examiners have been going to the smaller, out-of-the-way towns in Utah where CE courses are hard to come by.
One such class was conducted by Cathy Howick, Nancy Askerlund, Robert Herrera and Sandra Halladay, in Price and Moab. They provided a three-hour CE course entitled, "Got Ethics?" It offered solutions to everyday dilemmas with a lively exchange of ideas. Also included in the presentation was information about producer licensing, unfair marketing practices, fiduciary responsibilities, how to access producer information with the department via the web and how to update change of address information.
Probably the most valuable portion of these classes is the open forum. This time has provided both department personnel and licensees an opportunity to get to know one another. "It has given us a chance to discuss issues of concern and," as Nancy Askerlund observed, "to identify problem areas that were previously unknown." Once problem areas have been identified, licensees have been given time to make corrections.
Additional classes will be held in other areas of the state. We will let you know when we come your way.
Custodial Agreement Compliance
Effective September 19, 2006, substantive amendments were made to Rule R590-178, Securities Custody. The changes were based on the National Association of Insurance Commissioner's (NAIC) model regulation. The authority for this rule and its changes comes from Sections 31A-2-201, 31A-2-206, and 31A-4-108 and became enforceable December 18, 2006.
The changes include broker/dealers with a tangible net worth equal to or greater than $250 million dollars to be defined as custodians.
Section 7 of the rule sets forth penalties and prohibitions for insurance companies found to not be in compliance with the custodial agreement provisions. Custodial securities must be held under a proper custodial agreement containing all provisions of the rule, or these securities will not be allowed as admitted assets for the purposes of determining the insurer's financial condition.
It should be noted that Subsection 5(B) requires custodial agreements be in writing and authorized by the insurer's board of directors or authorized committee of the board, pursuant to U.C.A. Subsection 31A-5-412.
Insurers have the responsibility to bring their custodial agreements into compliance with these changes.
The department's Fraud Division, directed by Joe Christensen, has again exceeded their projections for the year. Their fiscal year ended July 30, 2007 with a number of records being set, as indicated below.
Description
FY 2006
FY 2007
New Cases Opened
410
473
Investigations completed
321
345 (record)
Arrests
135
174 (record)
Prosecutions initiated
147
175 (record)
Felonies charged
703
1,411 (record)
Admin. Resolutions
52
82 (record)
Fines/Restitutions
$933,882
$1,079,387 (record)
To give you an idea of the type of insurance these investigations relate to:
58% Medical Health Care
14% Agent Fraud
11% Automobile
9% Property
3% Title
2% Workers' Compensation
1% Fire
1% Life
1% Misc.
Last month the local media broke a story the Fraud Division had been working on for months. It involved mortgage fraud, at least a dozen people and possibly millions of dollars. In this case loan documents were falsified to inflate the value of the home for a quick resale. Joe described this as a big problem in Utah, in fact, Utah has consistently ranked in the top five states in mortgage fraud.
The work of the Fraud Division has frequently been highlighted in the media. They have cracked cases involving false medical billing practices, a prescription drug ring, identity theft, and others. Joe and the members of his division don't have to worry about running out of work. There is an endless supply.
On July 26th a group of insurance regulators and industry personnel met in a small conference room at Little America. Their task: To review a sampling of exam questions, which will be a part of the exams taken by applicants in their quest to become licensed insurance producers.
This is a yearly event supervised by Thomson Prometric – Utah’s Exam Vendor, and the Utah Insurance Department. Specialists in each line of license authority were assigned to their own table, provided with laptop computers and asked to scrutinize test questions and their answers. If committee members agreed that more than one of the answers could be right, or that the question was poorly worded, or was outdated or wrong, they had the right to “throw it out” or ask for a re-write.
Later that afternoon members of Thomson Prometric made themselves available for a public meeting, inviting questions about the testing procedures or statistical data. We were fortunate to have several of the pre-licensing providers attend. Notice about this public meeting was posted on the department's website for two months prior to the event. By maintaining this notification practice we hope to continue to have a healthy turnout in the future.
The Producer Licensing Division would like to thank everyone who participated. Your time and effort was greatly appreciated.
We have a new assistant chief examiner, Dan
Applegarth, CFE, CPA. Dan joined the Department in May of 1996. He obtained an Accounting degree from BYU and his MBA at Utah State University. For three years he performed financial examinations then transferred to the Analysis Section of the Examination Division.
Dan and his wife Kim have five children, ages 9 through 18, three of which are in high school. His wife Kim is a respiratory therapist and Dan is working on the NAIC Professional in Insurance Regulation (PIR) designation.
Utah is a member of the IIPRC, or the Interstate Insurance Product Regulation Commission. IIPRC is a central filing point for life, annuity, long term care, and disability income policy forms for the 30 member states.
For the past three to four years members of the department's Life and Health Divisions, Betsy Jerome, Sandra Christensen, and Suzette Green-Wright, have been members of the NAIC and IIPRC subcommittees. They have spent many hours participating in conference calls, hammering out and refining product standards. "As long as insurers create new products and marketing tools," said Ms. Christensen, "new product standards will have to be developed and current ones updated." To date, 14 product standards have been put into effect. An additional 11 standards are on their way to adoption.
The primary goal of member and non-member participants has been the streamlining of form filings and providing consumer protections.
"Streamlining of filings," means exactly that, a process offering the least resistance resulting in optimal velocity. The process allows a life and annuity insurer to have their form filings accepted by all member states with just one filing. This streamlined process also allows consumers to receive the product sooner. As you can imagine, this results in a substantial savings to the insurer in time and money.
Insurers are also given a guarantee by the IIPRC that their forms will be approved within 60 days of filing. This guarantee was tested on June 22, 2007 when the IIPRC received its first filings. Sure enough, they were approved within the time limit.
Consumers and insurers also benefit from the fact that forms have been standardized. Insurers are no longer required to have a different form for each state in which they do business. Consumers no longer need to compare forms from insurers domiciled in member states. In addition, policy forms contain higher standards of consumer protection. The hope is that this will result in fewer market conduct violations.
To learn more about IIPRC visit their website at http://www.insurancecompact.org/.
"An old Cherokee grandfather is talking to his grandson around a campfire. He tells his grandson that there is a fight going on inside every human being. It's a fight between a good wolf and a bad wolf. The bad wolf is a liar, hateful, a cheat and deceitful. The good wolf is caring, loving and concerned for the people.
The little boy asked his grandfather, 'Which wolf will win?'
The grandfather looked at his grandson and said, 'Whichever one you feed.'"
Securities Law?
As a licensed insurance professional, you may have sold variable annuity or life insurance contracts to your clients. Or, perhaps you have participated in the offer and sale of various non-insurance investment offerings to your clients. This article is an attempt to raise your awareness of the potential securities law violations that may result from the sale of certain investment products.
The Utah Division of Securities regulates the offer and sale of investment products. Generally, those who offer or sell securities in Utah must be licensed as an agent or an investment adviser representative with the Division of Securities.
How does this affect you?
Variable Contracts
If you recommend a variable contract to your client and as part of that recommendation you also suggest that your client invest in specific mutual funds offered within the variable contract, you are offering or selling securities or providing investment advice to your client. To do this you must be licensed as an agent or investment adviser representative with the Division of Securities.
Investment Advice
If you recommend that your client sell securities to purchase an insurance product or any other product, you are providing investment advice. You are required to be licensed as an investment adviser representative.
Non-Insurance Investment Offerings
Most non-insurance investment offerings are considered “securities” under both state and federal law. Any security sold in Utah must be registered with the Division of Securities unless it is deemed exempt. The Division of Securities has seen an increase in fraudulent unregistered securities offerings and wishes to warn insurance agents to avoid participating in the sale of these investments.
Often, the promoters of these non-insurance investment offerings target professionals such as you. They know you have an extensive client list and have a good business reputation. These scam artists rely on your good reputation to reel in unsuspecting investors.
The securities products often have attractive terms and are often described as “safe” or “guaranteed.” Unreasonably high rates of return are promised along with lucrative sales incentives and commissions. “Prime bank” notes, promissory notes, offshore investments, bond trading programs, oil and gas investments, and brokered or callable certificates of deposit, are some of the recent examples of these investment products.
Consequences
Under Utah law, selling unregistered securities or providing investment advice by an unlicensed person carries possible administrative, civil, and criminal penalties. In addition, defrauded investors seeking to recover their losses can sue the seller personally. Federal charges may also result.
Your inquiries are encouraged and may help stop potential securities fraud. If you are approached to market one of these types of investments or to provide investment advisory services, please contact the Division of Securities at (801) 530-6600 to determine:
(1) if the investment is required to be registered as a security; and
(2) if you are required to be licensed as an agent or investment adviser representative.
You are also encouraged to visit the Division of Securities’ website at www.securities.utah.gov.
Enforcement: Actions against
licenseesLink - http://www.insurance.utah.gov/Enforcement.html
Rules: In process & completed
