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					Top Property & Casualty Regulatory
   Changes and Emerging Issues
Credit Scoring
NCOIL Credit Scoring Model – 2009 Revision

Protect people affected by the current financial crisis

•   Extraordinary life circumstances (ELC): serious illness or
    injury; death of a spouse, child or parent; divorce;
    identity theft; temporary loss of employment; or
    military deployment
•   Insurers required to provide an exemption from "rates,
    rating classifications, company or tier placement, or
    underwriting rules or guidelines” to those who have
    filed written request
Credit Scoring - ELC

Iowa – Kansas -New Hampshire
• Written request from a consumer
• Insurer shall provide reasonable exceptions to the
   insurer's rates, rating classifications, company or tier
   placement, or underwriting rules or guidelines for a
   consumer who has experienced and whose credit
   information has been directly influenced by
   extraordinary life circumstances

Credit Scoring - 2010

• Adverse action cannot be based solely on information
   contained in an insured's or applicant's:
1. credit history
2. credit rating, or
3. lack of credit history

Effective January 1, 2011
Credit Scoring - ELC
• Insurers must disclose to each applicant that the credit history
   maybe used in the underwriting or rating of applicant’s policy, and
• That the applicant has the right to request, in writing, that the
   insurer consider an extraordinary life circumstance which occurred
   within 3 years before the date of the application
• Insurer must provide at policy issuance a written disclosure that
1. Insurer name, address, telephone number and toll-free telephone
2. Details about how credit information is used to underwrite or rate
3. Summary of consumer protections regarding the use of credit

Effective July 1, 2011
Credit Scoring - 2010

New Hampshire:
• Insurers prohibited from cancelling, nonrenewing, or
  declining automobile or homeowners policies solely on
  the basis of credit information obtained from a credit
  rating, a credit history, or a credit scoring model,
  without consideration of any other applicable and
  permitted underwriting factors

Effective January 1, 2011
Credit Scoring – 2011 Activity

•   Rhode Island: Regulation 116 establishes guidelines regarding
    the use of insurance scores in underwriting and rating of
    homeowners and/or private passenger automobile insurance
    when a consumer experiences an extraordinary life event.

•   Colorado HB 1127: Disclosure to include the particular components
    of credit information that factored into the decision to take the
    adverse action and the weight accorded each component.

•   Iowa SF 219: Proposed prohibition on the use of credit information
    to underwrite or rate risks for private passenger automobile.
Credit Scoring – 2011 Activity
    • HP 294: Provide consumer with notice of the credit score and
       identify the impact of that score on rates and coverage as part
       of the policy issued to the consumer.
    • HP 320: Prohibits a user of a consumer report from assigning a
       consumer a low credit score solely on the basis of a consumer's
       having no credit history if the consumer can demonstrate the
       ability to meet that consumer's financial obligations without
       borrowing on credit.
    • HB 309: Proposes allowing an insurer to utilize credit
       information, including insurance scores, in its rating plan or tier
       placement plan.
Credit Scoring – 2011

  • HB 1083: Prohibits a private passenger motor vehicle
    insurer from rating a risk based, in whole or in part, on
    the credit history of an applicant or insured in any
  • HB 929: Prohibits adverse action against consumer based
    solely on the number of requests made to a consumer
    reporting agency to furnish a consumer report on the
Credit Scoring – 2011

•   Michigan SB 300: Proposes to regulate use of credit information and
    credit scoring
•   Mississippi SB 2674: Would prohibit use of credit information in
    determining rating or eligibility for coverage.
•   Missouri HB 920: Prohibit an insurer from using a credit report or
    insurance credit score as a factor in underwriting or to take an
    adverse action based on a credit report or insurance score
•   Montana SB 137: Extraordinary life circumstances in personal lines
    underwriting and the use of credit information in automobile
    insurance rating and coverage eligibility. SB 29 added military
    service overseas as an ELC; HB 125: added credit report
Credit Scoring – 2011
   •     AB 74: Provide reasonable exceptions to the insurer's rates, rating
         classifications, company or tier placement, or underwriting rules
         or guidelines for an applicant or policyholder who has experienced
         and whose credit information has been directly influenced by any
         of the specified ELC’s; require that request be made not more
         than 60 days after the date of the application for insurance or the
         policy renewal.
   •     AB 162: Prohibit the use of credit information or the absence of
         credit information, a consumer credit report, as a basis to deny,
         cancel or fail to renew a policy, determine the rate of a new or
         existing policy, or make any change in the terms or amount of
         coverage of a new or existing policy.
Credit Scoring – 2011
•   New Hampshire HB 359: proposes to amend RSA 417:4 by making it
    a discriminatory and unfair insurance trade practice to charge
    higher premiums based on credit rating.

•   New Jersey SB 176: Prohibits the use of insurance scoring by
    property-casualty insurers in rate-making for personal lines
    insurance coverage.

•   New York SB 694: Proposes to require that an insurer writing
    commercial lines insurance, which uses credit information in
    underwriting or rating, must disclose such fact to the consumer and
    name the source of the credit information that will be used.
Credit Scoring – 2011

New York
• AB 4677: Proposes to require commercial lines insurers to provide
   notice to consumers when credit information is used in the rating
   or underwriting of such insurance
• AB 3660: Prohibit automobile insurers from using an applicant's or
   insured's credit history in the underwriting, rating or premiums for
   a policy of automobile insurance
• AB 5273: Calls for promulgation of rules limiting the use of credit
   scores to determine automobile insurance premiums.
Credit Scoring – 2011

• SB 34/HB 70: propose to amend section 3901.21 to
   prohibit an insurer's use of a credit score, credit
   history, or credit report in fixing a premium rate for, or
   the terms and conditions of, an insurance policy, or in
   determining whether to issue, continue, or renew an
   insurance policy
Credit Scoring – 2011
   • SB 126: Prohibit an insurer from denying, canceling or
     refusing to renew personal insurance due in whole or in
     part to an insured's credit history.
   • HB 1230: proposes to provide for use of the credit history
     of insured
   • HB 1285: proposes to regulate the use of credit
     information for personal lines insurance

South Carolina HB 3101 and SB 85:
   –   Prohibitions on the use of credit reports in rating and
Credit Scoring – 2011
Rhode Island
• HB 5077: proposes to amend 31-47-18 to prohibit the
   consideration of an applicant's credit history in
   determining automobile insurance rates
• SB 89: proposes to amend 27-9-56 to provide that
   insurers shall not use credit ratings to underwrite or
   rate risks
• SB 317: proposes to amend Section 31-47-18 to prevent
   the consideration of an applicant's credit history in
   determining automobile insurance rates
Credit Scoring – 2011

   • HB 194: Prohibit an insurer from rating a risk based wholly or
      partly on the credit information, credit report, or credit score.
   • HB 739: Prohibit an insurer from refusing to underwrite, cancel,
      or refuse to renew, or rate a risk, based in whole or in part on
      a credit report.

   • HB 1318: Prohibit an insurer from denying, cancelling or non-
       renewing personal insurance based in whole or in party on
       credit history, insurance score, education or income.
Credit Scoring – 2011

West Virginia:
   • HB 2049: Prohibit the use of a person's credit history in
       insurance transactions.
   • HB 2319: Prohibit the use of credit scores in casualty rate
   • HB 2467: Prohibit the use of credit scoring as a rating factor in
       homeowners or automobile liability policies and prohibit
       declinations of automobile insurance if based, in any part, on
       the number of inquiries reflected in a credit report, credit
       score report or CLUE report or upon any information contained
       in any of these reports, if the accuracy is disputed by the
Credit Scoring MCE Criticism

•   During the investigation of a consumer complaint, the
    Company revealed to OIC that it was using the number
    of credit inquiries on a consumer's credit report in
    setting premiums. (48.19.035)

WA 3/10
Consumer Protection:

•   Clarification
•   Informed coverage decisions
•   Personal lines concentration
•   Workers’ compensation claims
Claims Release Disclosure

New Hampshire

• I certify that I have read the above warning and fully understand it.

Effective January 1, 2010
Policy Limits Disclosure

New Hampshire

• Disclosure to the claimant, or his or her counsel, the
  policy limits of the policy or policies of all liability
  insurance applicable to the defendant as to such claim.

Effective January 1, 2010
Medical Records Disclosure

New Hampshire
• Request for medical records must contain this notice in:
1. bold print
2. font size at least 2 points larger than that used in the request:
• "This request is strictly limited to medical information relevant to
   the occupational injury or illness that underlies the patient's
   workers' compensation claim, including any past history of
   complaints of, or treatment of, a condition similar to that
   presented in the claim."

Effective July 1, 2010
Replacement Cost Estimates - 2011

• Replacement cost estimate for insured/applicant must
   meet the following requirements:
• Include expenses that would reasonably be incurred to
   rebuild the insured structure in its entirety, including at
   least the following: (1) cost of labor, building materials
   and supplies; (2) overhead and profit; (3) cost of
   demolition and debris removal; (4) cost of permits and
   architect’s plans; and (5) consideration of components
   and features of the insured structure, including at least
   those criteria listed in the regulation.
Property Insurance Disclosures - 2011

California: AB 2022

•   Revised the mandatory language of the California
    Residential Property Insurance Disclosure
•   Simplified and rearranged the descriptions of types of
•   Includes additional information concerning insurance

Effective July 1, 2011
Property Insurance Disclosures - 2011
"California Residential Property Insurance Bill of Rights” (Ins s 10103.5 ) includes:
•     The insurance company's customer service telephone number for underwriting,
      rating, and claims inquiries
•     A written explanation for any cancellation or nonrenewal of policy
•     An explanation of how policy limits were established
•     An itemized written scope of loss report prepared by the insurer or its adjuster
      within a reasonable time period
•     In the event of a claim, a copy of the Unfair Practices Act and, if requested, a copy
      of the Fair Claims Settlement Practices Regulations
•     In the event of a claim, notification of a consumer's rights with respect to the
      appraisal process for resolving claims disputes
•     An offer of coverage and premium quote for earthquake coverage, if eligible
•     A consumer is also entitled to select a licensed contractor or vendor to repair,
      replace, or rebuild damaged property covered by the insurance policy

Effective July 1, 2011
Homeowners Disclosure - 2011

Maryland: SB 136 (Pending)
• Homeowner's insurers to provide to an applicant or insured, at the
   time of application or renewal, a written notice that states
   whether the insurer's standard homeowner's insurance policy
   provides coverage for loss that:
   1. is caused by or results from a discharge of water from a
       plumbing system or plumbing source, including a discharge
       from a water main break, whether the plumbing system or
       plumbing source is located on or off the insured premises; and
   2. is not caused by the negligence of the insured.
Property Insurance Disclosure - 2011

Connecticut HB 6233: (Pending)
• Policies providing coverage for repair or remediation
   following a covered loss must bear on the declaration
   page, in not less than 12-point boldface type in capital
   letters, the following:

Property Insurance Disclosure - 2011

Connecticut HB 5110:
• Requires notice to an insured that he or she may choose
   the person who will perform the repair or remediation
   for a loss covered under a personal or commercial risk
   policy. (Pending)
Consumer Protection: Total
Total Losses


• Provide any valuation or appraisal reports relied upon by
  the insurer to determine value of total loss
• DOI developed disclosure form that includes information
  about the total loss, vehicle valuation, and the duties of
  the insurer, how and when the insured may contact the

Effective January 1, 2010
Total Losses

• Policy provides for the adjustment and settlement of vehicle total
   losses for ACV or replacement with like kind and quality
• The insurance company chooses a cash settlement based on the
   actual cost to purchase a comparable motor vehicle
• Costs must be derived by using either a fair market value survey
   conducted using qualified dealers in the local market area, or, if
   there are no dealers in the local market area, the nearest
   reasonable market can be used

Effective August 15, 2010
Total Losses


•   Insurer may elect the cash settlement actual cost
•   May be determined by the cost of a vehicle in the local
    market area if the vehicle is currently or recently
    available in the prior 90 days
•   Cash settlement and owner retention in total loss under
    specified conditions

Effective November 1, 2010
Total Losses

• Retail value of a total loss vehicle may be determined
   from any publicly available automobile industry source
   approved by the DOI
• Insurers must provide written notice including the
   insurance company's calculation of the vehicle's total
   loss, a valuation report and a notice to dispute the
   claims settlement

Effective January 1, 2011
Nevada – 2011 Total Loss

SB 142
• The owner of a motor vehicle who makes a claim under
   a policy of insurance for damages to the motor vehicle
   shall be deemed to have given his or her consent for
   the motor vehicle to be towed and placed in storage at
   the direction and expense of the insurer upon being
   given notice that the insurer has declared the vehicle a
   total loss
• Insurer not required to obtain any other form of release
   from the owner of the motor vehicle to have the motor
   vehicle towed and placed in storage
Total Loss MCE Criticisms

• Examiners identified 21 first/third party total loss
  settlements, in which the Company failed to pay
  appropriate tax, license registration and/or air
  quality fees. (§ 20-461, 20-462, A.A.C. R20-6-801)
  AZ 11/10
• Company did not always include sales tax and fees
  in the actual cash value calculations on owner
  retained salvage claims…Companies violated WAC
  284-30-3908 by deducting sales tax and fees in the
  actual cash value calculations in 1,788 owner
  retained salvage claims WA 3/11
Insurer Protection: Fraud
Fraud Initiatives - 2010

Rhode Island
• All claim forms and applications for insurance must
   contain the following statement or a substantially
   similar statement:
• “Any person who knowingly presents a false or
   fraudulent claim for payment of a loss or benefit or
   knowingly presents false information in an application
   for insurance is guilty of a crime and may be subject to
   fines and confinement in prison.”
Effective January 1, 2010
Fraud Initiatives - 2010

•   Arizona: Makes it a crime for an auto glass repair shop
    to bill an insurer for misrepresentations on a repair of
    an automobile
•   California: DOI meetings with insurers to discuss
    insurance fraud; immunity for meeting discussions of
    specific suspected, anticipated, or completed acts of
    insurance fraud
•   Florida: Property insurance reform bill sets stricter
    regulations on public adjusters
Fraud Initiatives - 2010
Louisiana (effective 1/1/11)
Anti-fraud plan
• Must be filed with the commissioner
• Must outline specific procedures, actions, and safeguards
• Must include how the authorized insurer will:
1. Detect, investigate, and prevent all forms of insurance fraud ,
2. Educate appropriate employees on fraud detection and the
    insurer's or health maintenance organization's anti-fraud plan.
3. Provide for fraud investigations
4. Report a suspected fraudulent insurance act to the DOI and
5. Pursue restitution for financial loss caused by insurance fraud
Fraud Initiatives - 2010
•   Minnesota: Roofers providing goods and services to be
    paid by an insured from the proceeds of a property or
    casualty insurance policy, cannot advertise or promise
    to pay or rebate all or part of any applicable insurance
•   New York: Annual report filed with legislature to
    include incidences of misrepresentation of where
    vehicle is garaged
Fraud Initiatives - 2010

Rhode Island

•  All insurance companies must have anti-fraud initiatives
   in place for detection, reporting, preventing fraud
• May include:
1. Fraud investigators, who may be insurer employees or
   independent contractors; or
2. An antifraud plan

Effective January 1, 2011
Fraud Initiatives – 2011 Pending

Minnesota SF 389
• Amends the anti-runner statute and sets standards for providers
   who offer inducements for services.

New Jersey AB 3486
• Policy may be voided to an insured who commits fraud or a policy
   the extension of coverage under such policy would not be denied to
   an innocent spouse, or the estate of an innocent spouse, even
   though the insured has committed fraud or is found to be in
   violation of the policy’s provisions.
Fraud Initiatives – 2011 Pending

Michigan SB 211
• Each insurer in this state shall develop, and file with
   the commissioner, a plan to detect and prevent
   insurance fraud

Nebraska LB 478
• Sets fines for acting as a runner or hiring a runner
   solicit clients or patients.
Certificates of Insurance
Certificates of Insurance - 2010

•   Arkansas, Connecticut, Iowa, Kansas, Missouri,
    Montana, Nebraska, North Dakota, Texas and Utah
    issued bulletins in 2010
•   Essentially serving as reminders about not issuing or
    using a Certificate of Insurance form that contains
    language that conflicts with or purports to alter any
    policy coverage, exclusion, provision or condition
Certificates of Insurance – 2010 Example

Texas – Evidence of Commercial Property Insurance

•   Forms are sometimes issued as “a matter of information only” or
    similar language without the contemporaneous issuance of a
    binding document or policy of insurance
•   Insurers or agents should not use any form or make attestations
    that do not accurately reflect what actually exists for the benefit
    of the policyholder or beneficiary, whether the form or attestation
    references a binder, policy, or action to be taken by the insurer
    with regard to issuing a binder or policy
•   Insurers or agents should not issue or sign forms that create rights
    and obligations outside the insurance contract
Certificates of Insurance - 2011

•   Arizona’s Bulletin 2011-01: outlines the requirements that
    certificates must clearly and accurately state the insurance
    coverage provided and may not obscure or misrepresent the
    coverage or terms of a policy
•   Georgia’s Directive 11-EX-2: reminder that every certificate of
    insurance, except automobile liability insurance cards, is to include
    the following statement, or a substantially similar one, printed
    conspicuously and in no smaller than 10 point font, boldfaced type:
    “This document is issued as a matter of information only and
    confers no rights upon the document holder. This document does
    not amend, extend, or alter the coverage, terms, exclusions,
    conditions, or other provisions afforded by the policies referenced
Certificates of Insurance – 2011 -

•   Kentucky Advisory Opinion 2011-02: Certificates of
    Insurance Restatement of Advisory Opinion 2004-03

•   New Jersey: Bulletin 11-04
Certificates of Insurance – 2011 -

Oregon HB 3005
• Sets standards for certificates of insurance; authorizes
   Department of Consumer and Business Services to make
   rules regulating certificates of insurance; and makes
   misuse of certificates an Insurance Code violation.

Utah HB 79
• "Property and Casualty Certificate of Insurance Act" -
   applicable July 1, 2012
Certificates of Insurance – 2011
Georgia HB 66 (Enacted):
Certificate of insurance to contain the following or similar statement:
• “This certificate of insurance is issued as a matter of information
    only and confers no rights upon the certificate holder. This
    certificate does not amend, extend, or alter the coverage, terms,
    exclusions, and conditions afforded by the policies referenced
• ACORD or ISO forms are deemed approved and not required to be
• No person may knowingly prepare or issue a certificate of
    insurance that contains any false or misleading information or that
    purports to affirmatively or negatively alter, amend, or extend the
    coverage provided by the policy of insurance to which the
    certificate makes reference
Certificates of Insurance – 2011

North Dakota SB 2062
• A person may not alter or modify a certificate of
   insurance form approved by the commissioner
• CNR Notice requirements: The only circumstance under
   which a certificate holder is entitled to the legal right
   to notice of cancellation, nonrenewal, or any material
   change or any similar notice concerning a policy of
   insurance is if the certificate holder has such notice
   rights under the terms of the policy or under any
   endorsement to the policy.
States are looking at…

• Issued certificates of insurance containing fictitious and
  or unauthorized application/policy numbers representing
  coverage when there was no coverage in effect without
  {Company's} authorization, knowledge or consent to the
  following clients.

AZ 9/10
Consumer Protection
Consumer Protection – 2011- Pending

•   Connecticut’s SB 168: would prohibit property and
    casualty insurers from assessing late fees on
    policyholders who make late premium payments.
•   New Jersey’s AB 3509 and SB 2432 both seek a
    requirement for insurers to allow payment of
    homeowners' insurance premiums in monthly
South Carolina - Pending

HB 3344 would:
• Enact the Unfair Discrimination Against Subjects of
   Abuse in Insurance Act
• Provide that it is unfair discrimination for an insurer to
   deny, refuse to issue or renew, cancel, restrict or
   exclude coverage, deny a claim or limit payments, or
   add a premium differential to a policy or certificate of
   coverage on the basis that an applicant or insured has
   been or is perceived to have been abused or may be a
   subject of abuse and
• Provide penalties, including fines up to $200,000
Florida Claims – Enacted May 17, 2011

•   Limits public adjuster compensation for reopened or supplemental claims
    to 20 percent of the claim; requires additional disclosure statements
•   Requires insurers to provide two replacement cost coverage options for
    payment of personal property insurance claims; 1st option pays the full
    replacement cost; 2nd option pays the depreciated value and retains
    remainder of coverage until the policyholder provides receipts
•   Requires a policyholder to file windstorm/hurricane claims within 3 years
•   Specifically defines “structural damage” to narrow the definition of a
    sinkhole loss; policyholder required to pay 50 percent of sinkhole testing
    costs up to $2,500 if the policyholder requests testing after an insurer
    denies the sinkhole claim; sinkhole claims must be filed within 2 years of
    the covered loss
•   Reinstates file-and-use for rates until May 1, 2012
Virginia - Enacted Claims

SB 1416
• When a vehicle has been damaged by water to such an
   extent that the insurance company insuring it has paid
   a claim of $3,500 or more because of this water
   damage, the insurance company shall report the
   payment to the Department
North Dakota - Enacted Claims

SB 2237
• Insurers prohibited from making or permitting any
   unfair discrimination, including consideration of an
   individual's history or status as a subject of domestic
Nonadmitted and Reinsurance
        Reform Act
States and the NRRA

Connecticut HB 6363 - Pending
• Proposes enactment of the NCSL’s “SURPLUS LINES
New Hampshire HB 424 – Pending
• This bill enables premium taxes for non-admitted
   insurance, including surplus line insurance, to be
   collected and disbursed
• Also allows a foreign insurance company to be
   designated as a surplus line insurer under certain
States and the NRRA

Montana SB 331 - Enacted
• Per the Nonadmitted and Reinsurance Reform Act of 2010:
   1. the transaction of surplus lines insurance is subject to the
      statutory and regulatory requirements of the home state of the
      insured, regardless of whether a multistate risk is covered
   2. For purposes of this state if, at the time of the surplus lines
      insurance transaction, the home state:
   – is Montana, the surplus lines insurance transaction is subject to
      the applicable statutory and regulatory requirements in
      Montana; or
   – is not Montana, the Montana statutory and regulatory
      requirements regarding the surplus lines insurance transaction
      are preempted by the statutory and regulatory requirements of
      the home state.
Federal - MSP

November 9, 2010
• Revised the implementation timeline for TPOC
   settlements, judgments, awards, or other payments
• Extended current dollar thresholds for liability
   insurance and workers' compensation
• Changed the required submission of initial claim reports
   from the 1st calendar quarter of 2011 to the first
   calendar quarter of 2012 for all liability insurance TPOC
   amounts with no ORM
• Liability insurance ORM reporting is not delayed
Federal - MSP

•   HR 1063: Strengthening Medicare and Repaying
    Taxpayers Act “SMART Act”
    1. Discretionary assessment of civil money penalties based
       on the knowing, willful, and repeated nature of the
    2. Fines for an insurer failing to report settlements and ORM
       with Medicare beneficiaries becomes “up to $1,000” for
       each day of noncompliance
    3. Accounts for “good faith efforts” to comply
Federal - MSP

•   HR 1063: Strengthening Medicare and Repaying
    Taxpayers Act “SMART Act”
    1. Provides for expedited determination of reimbursement
       amount to improve program efficiency
    2. CMS to develop an alternate way of identifying whether
       someone is a Medicare beneficiary through the query
       system in place of the use of the claimant’s full Social
       Security number or Medicare number

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