Ask Tim

Ask Tim, Episode #23 -- Commercial Lines Modernization

The latest episode of Ask Tim looks at the new almost-law that allows insurance carriers to write more policies in the so-called Free Trade Zone. I say "almost-law" because, while it has passed both chambers of the New York State Legislature, Gov. Cuomo has not yet signed it, though all indications are that he will.

Summary:

• Carriers can write policies free from rate and form filing approval requirements for "large commercial insureds".
• A large commercial insured generates at least $25,000 in annual commercial insurance premium, employs or retains a "special risk manager," and meets at least one of the following criteria:
  • Net worth of $7.5 million or more
  • Net worth of $1.5 million or more and gross assets of more than $10 million
  • For-profit business with net worth of at least $1.5 million and annual gross revenues of more than $15 million
  • For-profit business with annual gross revenues of more than $15 million and gross assets of more than $10 million
  • Not-for-profit or public entity with an annual budget of more than $20 million
  • Municipality with a population of at least 50,000
  • Has at least 50 employees or 100 employees within the corporate structure
• The special risk manager must be a licensed producer who meets specfic educational and experience criteria.
• Carriers must make informational filings, and the law contains other consumer protections.
• The law expires on June 30, 2013.

More information:

• The complete text of the bill
• Capitol Report, June 30, 2011

 

Download Ask Tim Episode #23

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Mich. Congresswoman: Get the Government Out of the Flood Ins. Business

I have serious reservations about this proposal. While it is always a good thing to review and evaluate how any government program is working, looking at in isolation is not. The National Flood Insurane Program has many problems, but what is the alternative? Are private insurers clamoring for the chance to write flood coverage? If they are, no IIABNY members have told me about it.

According to another article, Rep. Miller asked rhetorically, "What in the world is the federal government doing in the flood insurance business?" The answer to that question, of course, is that private insurers found the flood insurance business to be a losing proposition. Congress created the NFIP in the 1960's to fill the void left by private insurers who were losing their collective shirts in it. Have market conditions changed since then to the point where property owners no longer need a government program? I will be curious to hear testimony on that question if and when the relevant congressional committee holds hearings on this bill.

Rep. Miller has done us a favor by opening the debate. She's laid down her cards -- the NFIP should go. Let's have an open, intelligent discussion about how this country should protect property owners from the risk of flood loss.

As always, I'd like to hear your thoughts on this bill and the flood insurance situation in general. So, flood me with your opinions ("flood me" -- get it?) in the comments.

 

Legislation Introduced To Phase Out NFIP

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February 8, 2011 By Arthur D. Postal, PropertyCasualty360.com

The legislation to phase out the National Flood Insurance Program, H.R. 435, was introduced by Rep. Candice Miller, R-Mich. (File Photo: AP)

NU Online News Service, Feb. 8, 3:10 p.m. EST

WASHINGTON—Legislation has been introduced in Congress that would phase out the National Flood Insurance Program by the end of 2013.

The legislation, H.R. 435, was introduced by Rep. Candice Miller, R-Mich.

The bill would also immediately end all remapping of the program mandated by prior reauthorizations of the program, thereby ending the agency’s authority to charge more to current customers based on new maps mandated by the 2003 law that remains in effect.

Earlier this month, Rep. Miller had asked colleagues to support the measure.

That Congress may take a long look at the program was also acknowledged earlier this week by Rep. Scott Garrett, R-N.J., chairman of the Capital Markets Subcommittee of the House Financial Services Committee, which has prime jurisdiction over the program.

During an appearance at a housing conference Monday, Rep. Garrett said, “The government's history in pricing risk is extremely poor,” citing the Federal Deposit Insurance Corporation, the National Flood Insurance Program, and the Pension Benefit Guaranty Corp. as three entities with “terrible records of properly pricing for risk.”

The current program expires Sept. 30, the end of the current fiscal year. The program has been extended five times, with several lapses, since the origin

via www.propertycasualty360.com

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A Look At Insurance Bills in the NYS Legislature

It's not all glamour being IIABNY's resident InsuranceGeek^®. I know what you're thinking -- "Tim, you have the geek cave, the Flip Cam, the freedom to travel to the Indy 500, Hogwarts Castle, and the beach." Well, yes, but -- leaving aside the association's failure to date to honor my rather modest job perk requests (50 pound boxes of peanut M&M's; bottled Alpine spring water with expiration dates no sooner than December 31, 2012; and a Swedish masseuse named Helga) -- still, there are times when even I must engage in tasks that are somewhat less than intellectually challenging. In the vernacular: Grunt work.

One of these tasks is updating the Insurance Legislation pages on the IIABNY Web site. When our legislative representatives (Michael Barrett, Jill Muratori and Peter Carr) send us the raw file for the Capitol Report, they include a list of insurance-related bills recently introduced in the New York State Legislature. I take that information and enter it on the legislation pages on our Web site so that members can peruse the list and get more information about any particular bills that interest them. When a bill gets introduced, I normally put it for one week on the list of new bills, then move it to its appropriate category (auto, life and health, workers' comp, etc.) afterword.

If you click the link in the last paragraph, you will find no bills listed as having been recently introduced. That is because the latest Capitol Report had a list of bills that went on for eight pages. Eight frackin' pages. If there's one thing our representatives in Albany really enjoy, it's introducing legislation. I decided, in the interest of keeping the list of new bills reasonable, to just skip that step and put all the new introductions on their appropriate pages. I'm not done yet, but I'm more than halfway finished.

This blog post actually has a point, and it's not about how oppressive my workload is. Rather, as I was updating these pages, the interesting ideas our representatives have for state laws jumped out at me, and I thought you might find some of the proposals 1) interesting; 2) terrifying; 3) laughable. Bear in mind that thousands of bills get introduced each year but only a few even make it out of committee, let alone gain passage from both legislative chambers and the governor's signature. So don't barricade the doors as you read some of these. This is just a sample of what at least some members of the Assembly and Senate would like to do:

• Reduces a retired or disabled owner's no fault insurance premium by providing appropriate automobile insurance rates to reflect a reduced exposure to loss due to situations where drivers either have no wages to lose or are covered for lost wages by another first payer insurance policy. (Bill numbers A.530, S.803, Assemblyman Thiele, Senator LaValle)
• Prohibits the inclusion of any advertisement or other information in any mailing sent by the department of motor vehicles. (A.617, Assem. Sayward)
• Provides that an insurer may not hold nor acquire interest in a motor vehicle repair shop. (A.960, Assem. Destito)
• Requires motor vehicle repair shops to provide written notice to customers that an insurance company cannot require a person to use a specific repair shop. (A.1192, Assem. Gantt)
• Provides that reduction in auto insurance premium for insured who completes defensive driving course shall not be less than fifteen percent. (A.1236, Assem. Colton)
• Provides that motor vehicles manufactured after December 31, 2011 and operated in New York state shall be equipped with an event data recorder. (A.1870, Assem. Jeffries)
• Relates to prohibiting rate variations of over ten percent between counties within the city of New York for non-business private passenger automobiles. (S.1344, Sen. Dilan)
• Provides for the revocation of insurers license, and prohibits the sale of new policies where insurer cancels or fails to renew two percent or more of home owner policies in high risk areas, including coastal areas. (S.1118, Sen. Parker)
• Provides that the maximum deductible allowed in catastrophic windstorms shall not be greater than fifteen hundred dollars and shall be stated in the policy in numerical terms; also provides that deductibles shall only be applicable to losses incurred in windstorms with speeds greater than 125 miles per hour. (A.1413, S.1460, Assem. Thiele, Sen. Lavalle)
• Requires notice of cancellation or non-renewal of property/casualty insurance policies to be sent by an insurer to an insured by registered or certified mail, return receipt requested. (S.833, Stavisky)
• Requires insurers to provide certificate holders with at least thirty days prior written notice of termination of group health insurance coverage. (A.2006, S.1167, Assem. Weprin, Sen. Parker)

That's just a smattering of the bills lawmakers have introduced. Probably very few of them will become law. What are your thoughts on these or some of the others you see listed on our Web site? Let me know in the comments.

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Only 734 More Days Until the Next Election...

Gee, wasn't that fun?

The election is over. No more TV adds accusing a candidate of being a corrupt, adulterous scumbag who doesn't floss regularly and who does lines of coke every morning as soon as he's done raising your taxes. Watching TV just won't be the same; it will be...enjoyable.

Now that New York has a new governor and a lot of the same legislators, what happens to the independent insurance agents' agenda? Sure the state's looking at another gigantic budget deficit, a problem that David Paterson will cheerfully hand off to Andrew Cuomo on January 1. While our issues may be secondary in terms of the attention lawmakers give them, they are no less important. No fault insurance remains a gold mine for organized crime. The 2007 workers' compensation reforms are still not fully implemented. We still don't know what workers' comp coverage obligations, if any, an out-of-state employer has for employees who visit the state on business. The homeowners market in eastern Long Island remains tough on its best days. The scaffolding law is still driving up liability insurance rates. It's very possible (maybe even likely) that the IIABNY/CIBGNY legal action against the New York Insurance Department will be unresolved when the new administration takes office. And those are just the problems I can think of off the top of my head.

Campaigning for elective office is ugly, but governing can be even uglier. The saying goes that to govern is to choose. When politicians choose, they tend to make at least some of the citizenry rather angry. You may have noticed that during the just-concluded election season. New York State legislators and the governor are almost guaranteed to make just about everyone angry about something; a $9 billion budget deficit makes that inevitable. So yes, governing for the next two years will be ugly. In the midst of the ugliness, I hope lawmakers will give some attention to some very serious insurance issues. Agent participation at IIABNY's Capital Event in February will be essential to raising awareness of these problems. Mark your calendars now.

And if you're really suffering from the day-after-Election-Day blues, just remember that November 6, 2012 is only 734 days away. Don't shoot the messenger.

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Health Care Reform 101

Health reform's complicated - but it can be easily explained. The good folks at the Kaiser Family Foundation have produced a terrific video - that's entertaining to boot - laying out pros and cons, explaining the rationale behind and opposition to reform, and all from a neutral perspective.

via www.joepaduda.com

This post from Joe Paduda's Managed Care Matters blog lists several excellent resources for those of you trying to understand the Patient Protection and Affordable Care Act (aka health care reform.) I especially recommend the Kaiser Family Foundation's video. It's about 9 minutes long, illustrates the various features of the law, and points out the arguments of those on both sides of the debate. It's a good educational tool for both clients and insurance professionals trying to get a handle on the changes we'll see over the next several years.

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Health Care Reform Phase 1: Changes Effective Tomorrow

While much of the federal Patient Protection and Affordable Care Act (aka health care reform) does not fully take effect until 2014, some key provisions affecting health insurance apply to health plan years beginning on or after tomorrow, September 23, six months from the date the president signed the law. The changes include:

• Young adults can stay on their parents' plans until age 26 unless the parents have a group health plan and the young adult has the option to purchase a plan where he works.
• Plans created since March 23, 2010 must cover certain preventive care procedures such as cancer screenings, mammograms and colonoscopies and may not charge deductibles, co-payments or coinsurance. The plan may charge a fee if the patient uses an out-of-network provider. Plans created before March 23 are not subject to this requirement.
• Insurers may not rescind coverage after an insured gets sick. This was a larger issue in states, such as California, that have a large individual health policy market; New York's individual market is comparatively small, so it has not been a major issue here.
• New procedures for patients to appeal insurers' claims decisions and an external review process apply to plans created after March 23.
• Insurers may no longer apply lifetime dollar limits on "essential" benefits, such as in-patient care at hospitals, and new restrictions on annual limits apply. 
• Insurers may not deny coverage for children under age 19 who have pre-existing conditions.

These changes come on top of those implemented earlier this year, including small business health insurance tax credits, the closure of the so-called "donut hole" for Medicare prescription drug beneficiaries, funding to state governments for expanded Medicaid coverage, new screening procedures to reduce fraud in public health programs, an early retiree reinsurance program, and coverage pools for uninsured persons with pre-existing conditions.  

This law remains controversial six months after its enactment, particular the requirement beginning in 2014 that most individuals purchase health coverage or pay a tax penalty. That requirement is more than three years away. What do you think of the changes that take effect this month or that have already taken effect? Are they desirable? Too expensive? Too intrusive? Long overdue? Do they not go far enough? Leave your thoughts in the comments.

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Friday Pot Pourri: A Mish-Mash of Questions

It's after five on a Friday, and the research director's brain is officially oatmeal. At this point, the toughest questions I want to answer are, "What do you want for dinner?" and "Heineken or Sam Adams?" However, before I sprint out of the Geek Cave for the weekend, here's some answers to a few of the questions that have come across my e-mail and phone in the last couple of days:

• When it comes to an insurance agency holding a raffle, the New York Insurance Department says there are two requirements to avoid violating the anti-rebating law: The raffle must be open to the public, and "the ability to win or enter the raffle must not be an inducement for, or interdependent with the purchase or solicitation of insurance." If a raffle entry results in the agency soliciting the contestant's business, the raffle violates the anti-rebating law. I'm not sure why else an agency would hold a raffle, so take this under advisement.
• A life insurance company may have to pay the death benefit to the survivors of an insured who lied about his smoking habit when he applied for the insurance 10 years prior. However, the ultimate answer depends on the facts of the case and whether certain court decisions apply.
• A not-for-profit organization's bulk mailing that contains an advertisement for an insurance policy is not eligible for a reduced postage rate unless the organization promoting the policy is authorized to mail at the nonprofit rates at the office of mailing; the policy is designed for and primarily promoted to the members, donors, supporters, or beneficiaries of that organization; and the coverage provided by the policy is not generally otherwise commercially available.
• New York law requires insurers to obtain anti-arson applications for all policies insuring properties in New York City, Rochester and Buffalo for fire explosion except for those covering owner-occupied residential properties with less than five units.
• Insurers, agents and brokers have no statutory responsibility under the New York State Construction Industry Fair Play Act to provide the required notices to contractors.
• The ISO Commercial General Liability Coverage Form probably will not cover the insured's legal liability for a misleading advertisement, an unsuccessful transaction on the Web, or theft of information from the insured's computer systems. A specialty cyber-risk policy, the ISO Electronic Data Liability Coverage Form and the ISO Crime Computer Fraud and Funds Transfer Fraud coverages are the appropriate policies for these types of losses.
• A New York insurance broker may accept commissions and service fees for the same transaction.
• The insurance license for an agency cluster must name at least one actual person as a sub-licensee, but it should not list the names of the agencies that are members of the cluster.
• When a commercial package policy insured a property destroyed by fire, and the insured wishes to cancel the property coverage but continue the liability coverage, the only practical way to do so is to cancel the package and issue a standalone liability policy.

And that will close the book on the week of September 13. A blessed and enriching Yom Kippur to all my readers of the Jewish faith, and a restful weekend to all!

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So How Do You Like Giving Your Money To No-Fault Crooks?

ALBANY, N.Y., Sept. 15 /PRNewswire-USNewswire/ -- Excessive billings by medical mills, fraudulent companies that provide few if any real health care services to the public, are a key factor in driving New York State's no-fault automobile insurance fraud crisis. New data shows the problem with medical mills' excessive treatment is growing, according to the New York Alliance Against Insurance Fraud (NYAAIF).

via www.prnewswire.com

Think about this next time you write a check for auto insurance or deliver a policy to a client. A large chunk of the premium goes to cover the cost of criminal activity. Unfortunately, this is an old story here in the Empire State. Organized crime is making a bundle off fraud in the no-fault system. Someone recruits someone to stage an accident, and that someone goes to someone else for "medical treatment", and that someone reports 10 tests on the bill to the auto insurer when maybe he actually only did one. And every participant in this dance gets a little piece of the action, and heck, they're only screwing insurance companies, so who cares, right?

Well, they're not only screwing insurance companies because most insurance companies are not non-profit organizations. They want to recover their costs and then some. Their stockholders have kind of come to expect it (mutuals are another story, but they have revenue pressure as well.) So, if no-fault fraud is raising their costs, and they can invest the premium money and make a whopping 0.5 percent interest, they have little choice but to get revenue from their customers. So we all pay for the ruthless, immoral actions of common thugs.

IIABNY, along with its partners in the New York First reform coalition, has been lobbying the New York State Legislature for years to enact serious no-fault reform. If acting as a "runner" (the person who recruits the participants) was a felony, and if companies had more time to investigate potential fraud, and if arbitration of disputed claims was mandatory, and if there were written medical protocols for treatment of no-fault injuries, the numbers the NYAAIF described in this release might shrink. And that would be good for everyone who uses a car in New York.

Until that happens, we can continue cheerfully handing over our money to the medical mills and the crooks who are backing them.

UPDATE Sept. 27, 2010: Say what you will about Geico (yes, their ads are so ubiquitous that I sometimes feel like the sound of one more will inspire me to stick sharp objects in my eyes and ears,) but they are putting their money behind the fight against no-fault fraud. Good for the gekko! I hope their lawsuits are successful.

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New Law Lets Municipal Reciprocals Write Some Fidelity and Surety Coverage

Question from an IIABNY member: We are looking for someone that can tell us what Senate Bill 5110, which changes the authority for municipal reciprocals, means. What does it allow the reciprocals to offer for insurance in New York?  Does the reciprocal now have the ability to bond all employees for dishonesty beyond the individuals doing official undertakings? Or is it just the people handling the financials? Such a bond would be a blanket bond and not a specific bond on a person or job title? Can the reciprocal offer that? Does the reciprocal have the ability to offer crime insurance for non-employees such as forgery, money and securities, computer fraud and wire transfer? If they do not now would it be just a matter of them filing the necessary paperwork to be able to offer this type of insurance?

Answer: Senate Bill 5110, which the governor signed into law on Aug. 13, changes N.Y. Insurance Law Sect. 6102(a). That section permits 25 or more various governmental units (counties, towns, school districts, etc.) to organize a statewide municipal reciprocal insurer. Under the prior law, the reciprocal could provide one or more of the following coverages:

• Fire
• Burglary and theft
• Glass
• Boiler and machinery
• Elevator
• Animal
• Personal injury liability
• Property damage liability
• Marine protection and indemnity

The new law authorizes the reciprocal to provide fidelity and surety for official undertakings conditioned for the faithful performance of official duties by a public officer, as referenced in N.Y. Public Officers Law Sect. 11. N.Y. Public Officers Law Sect. 2 defines “officers” this way:

The term "state officer" includes every officer for whom all the electors of the state are entitled to vote, members of the legislature, justices of the supreme court, regents of the university, and every officer, appointed by one or more state officers, or by the legislature,  and  authorized  to exercise his official functions throughout the entire state, or without limitation to any political subdivision of the state, except United States senators, members of congress, and electors for president and vice-president of the United States. The term "local officer" includes every other officer who is elected by the electors of a portion only of the state, every officer of a political subdivision or municipal corporation of the state, and every officer limited in the execution of his official functions to a portion only of the state. The office of a state officer is a state office. The office of a local officer is a local office.

Therefore, the reciprocal’s ability to offer fidelity and surety coverage is limited only to officers as defined above and not to all municipal or state employees. As to the structure of the bonds (blanket vs. position), I imagine that they would probably be position or name based, since it is only certain officeholders who must obtain these bonds.

With regard to whether the reciprocal can offer crime insurance, you have to refer back to the definitions of “burglary and theft insurance” and “fidelity and surety insurance” in N.Y. Insurance Law Sect. 1113(a). Sorry, but they’re kind of long:

(7) " Burglary and theft insurance ," means:

(A) Insurance against loss of, or damage to, any property resulting from burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, confiscation, or wrongful conversion, disposal, or concealment by any person, or from any attempt thereof;

(B) Insurance against loss of, or damage to, moneys, coins, bullion, securities, notes, drafts, acceptances, or any other valuable papers or documents, resulting from any cause, except while in the custody or possession of, and being transported by, any carrier for hire or in the mail;

(C) Insurance of individuals by means of an all-risk type of policy commonly known as the "Personal Property Floater" against any kind and all kinds of loss of, or damage to, or loss of use of, any personal property other than merchandise;

(D) Insurance covering a ransom or reward payment incurred as the result of an abduction or the theft of property; travel and lodging expense and lost wages incurred as the result of an act or threatened act of violence; expense incurred to locate or identify a missing or abducted person; or other expenses to respond to a violent act or threatened act, or to prevent a reoccurrence thereof; and

(E) Insurance against losses and expenses resulting from a " stolen identity event ," which shall include the theft, accidental release, or publication of, or misappropriation of information related to, an individual's personal identification, social security number, or other method of identifying the individual, that has resulted in, or could reasonably result in, the wrongful use of the information.

(16) " Fidelity and surety insurance ," means:

(A) Guaranteeing the fidelity of persons holding positions of public or private trust; and indemnifying banks, thrifts, brokers and other financial institutions against loss of money, securities, negotiable instruments, other specified valuable papers and tangible items of personal property caused by larceny, misplacement, destruction or other stated perils including loss while being transported in an armored motor vehicle or by messenger; and insurance for loss caused by the forgery of signatures on, or alteration of, specified documents and valuable papers;

(B) Insurance against losses that financial institutions become legally obligated to pay by reason of loss of customers' property from safe deposit boxes;

(C) Any contract bond; including a bid, payment or maintenance bond or a performance bond where the bond is guaranteeing the execution of any contract other than a contract of indebtedness or other monetary obligation;

(D) An indemnity bond for the benefit of a public body, railroad or charitable organization; a lost security or utility payment bond;

(E) Becoming surety on, or guaranteeing the performance of, any lawful contract, not specifically provided for in this paragraph, but does not include becoming surety on, or guaranteeing the performance of:

(i) any insurance contract except as authorized pursuant to section one thousand one hundred fourteen of this article; or

(ii) any contract, if becoming surety on, or guaranteeing the performance of that contract, would constitute:

a. mortgage guaranty insurance as defined in subsection (a) of section six thousand five hundred one of this chapter;

b. financial guaranty insurance as defined in subsection (a) of section six thousand nine hundred one of this chapter; or

c. service contract reimbursement insurance as defined in paragraph twenty-eight of this subsection;

(F) Becoming surety on, or guaranteeing the performance of, bonds and undertakings required or permitted in all judicial proceedings or otherwise by law allowed, including surety bonds accepted by states and municipal authorities in lieu of deposits as security for the performance of insurance contracts;

(G) Becoming surety on, or guaranteeing the performance of, any agreement for the lease or rental of non-residential real property or tangible personal property, provided that the obligation of the insurer shall not exceed a period of five years, and the bond is not issued directly or indirectly in connection with the sale of securities, a pooling of financial assets or a credit default swap as defined by article sixty-nine of this chapter;

(H) Becoming surety on, or guaranteeing the performance of, a contract of indebtedness or other monetary obligation where: (i) the aggregate gross principal, interest, and other amounts of indebtedness or other monetary obligations of any obligor whose obligations are guaranteed by the insurer under all bonds issued to that obligor pursuant to this subparagraph by the insurer does not exceed ten million dollars; and (ii) the bond is not issued directly or indirectly in connection with the sale of securities, a pooling of financial assets, or a credit default swap as defined by article sixty-nine of this chapter; and (iii) the bond by its terms terminates upon any sale or other transfer of the insured obligation in connection with the sale of securities, a pooling of financial assets, or a credit default swap as defined by article sixty-nine of this chapter;

(I) A depository bond that insures deposits in financial institutions to the extent of the excess over the amount insured by the Federal Deposit Insurance Corporation; and

(J) Becoming surety on, or guaranteeing the performance of, a bond, which shall not exceed a period greater than five years, that guarantees the payment of a premium, deductible, or self-insured retention to an insurer issuing a workers' compensation or liability policy.

In this chapter "fidelity" insurance shall have the meaning set forth in subparagraphs (A) and (B) of this paragraph.

It appears that the law authorizes the reciprocal to provide money and securities, computer fraud, forgery, and wire transfer insurance. As you suggested, the reciprocal must file its program with the Insurance Department if it hasn’t already.

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More on the Big "I" National Legislative Conference & Convention

Last month I wrote a post about why New York insurance producers should make the trip to Washington, D.C. at the end of April for the Big "I" National Legislative Conference and Convention. National Underwriter's Mark Ruquet published an article about the event in the online magazine's March 23 issue. He interviewed IIABA CEO Bob Rusbuldt, who laid out the stakes very clearly and starkly. Well worth the read if you've been on the fence about whether to attend.