Regulatory Roundup: Kentucky Passes Military Spouses Law, Michigan Tackles Fraud and Drlp Penalties, and Texas’s State of Emergency Touches Insurance Industry

State by state variations of laws, compliance protocols, industry transparency, and general regulatory cultures can lend one the impression that keeping up with industry changes is a little bit like herding cats. So, what better way to wrangle some of the more localized insurance news than in a Regulatory Roundup?

On an ongoing basis, in no particular order or rank, we’re wrestling the various regulatory changes, compliance actions, and commissioner decisions into our roundup. As a disclaimer: There’s a lot going on at any given time in these here United States, so this isn’t a comprehensive picture of state-level action by any means. Think of it as, instead, a sample platter of regulation. 

Kentucky clarifies interpretation of auto policy guidance

Kentucky’s Department of Insurance issued an interpretation of an auto notification law to give auto insurers clarity. KRS 304.39-060(6) states: “Every insurance company when issuing an automobile policy to a resident of this Commonwealth must inform the buyer in writing in a form to be prescribed by the insurance commissioner of his or her right to reject the limitations of the tort rights and liabilities under this subtitle in the manner provided in subsections (4) and (7) of this section.” 

The state’s news release said auto insurers have varied widely in their interpretations of the “when issuing” part of the law. Some send a notice of rights every policy renewal, others send it only once. The Department of Insurance Public Protection Cabinet said their interpretation is that the notice should be sent when a brand new policy is issued, or when a new driver is added to the policy.

Kentucky also passed a law requiring administrative agencies to issue temporary or permanent insurance licenses to current-military spouses who meet all statutory requirements of the insurance license without payment of dues or fees. Additionally, new legislation restricts regulatory bodies from encouraging regulations that would limit telehealth coverage for people who find themselves outside of Kentucky’s boundaries. 

Michigan judge says producer’s redlining defense for insurance fraud “without merit”

A Michigan judge issued a summary decision in the case of DIFS v. Joseph F. Mullins and Worldwide Underwriters LTD on June 13, 2022. Amidst redactions and “pursuant to’s,” the tl;dr was that Mullins and Worldwide submitted applications for multiple consumers to get vehicle insurance and requested favorable rates based on the applicants being homeowners. 

When the carrier requested proof of homeownership, Mullins uploaded a proof of homeowners insurance form from Fidelity – a company that hadn’t offered homeowner’s policies in Michigan for nearly a decade. The fraudulent proof of insurance was the same in each case, with a nonexistent policyowner name and nonexistent policy number. Further, the address the agent said the vehicle was garaged at – the one on which the carrier would base the rates – was incorrect.

While this seems at first blush to be a straightforward case of insurance fraud, the summary judgment includes a few very interesting details. Mullins readily admitted to the fraudulent information, but told the judge in the fact-finding process that he was “justified in breaking the law to avoid an even greater law of Redlining.” 

Redlining is the practice of denying services to Black or other minority neighborhoods, or offering those services at punitatively higher rates. While the practice has a well-documented history in America, ultimately Judge Thomas Halick disagreed redlining was at play in this case, saying “Respondents’ defense is without merit.”

Halick ordered that Mullins and Worldwide cease breaking Michigan insurance statutes, fined them $12,000, and mandated that Mullins take three additional hours of continuing education in ethics in the next 60 days.

In other news from the Michigan Department of Insurance and Financial Services, the department has terminated insurance producer licenses for several business entities after they failed to provide designated responsible licensed producer (DRLP) information to the state. Diversified Wealth Strategies LLC, Bernard Insurance Agency LLC, William P. Nettle Agency, Diversified Insurance Services, and Washington Enterprises Inc. each were given multiple warnings from the state and failed to follow up with the relevant information.

Just as a reminder, DRLP requirements vary state to state, and it’s a pretty big deal to stay on top of them… Check out our How to Start an Independent Insurance Agency Guide if you want to know what to look for.

Uvalde, Texas, shooting and insurance

Following the horrific school shooting at Robb Elementary School in Uvalde, Texas, on May 24, 2022, when an 18-year-old killed 19 students and two teachers and wounded 17 others, Gov. Greg Abbott issued a disaster declaration. The declaration intended to give state agencies more authority to pursue action to lessen the severity of the shooting’s aftermath.

In response, the Texas Department of Insurance (TDI) issued a statement encouraging health benefit plans to extend coverage of telehealth services for mental health. TDI also encouraged carriers to pay pharmacies for up to 90-day supplies of any prescription medications for insureds, regardless of when the prescription was filled.

The TDI news release said, “Cooperation by every plan will help ensure the fair and compassionate treatment of consumers in Uvalde County and provide for fair competition.”

Other state updates:

• South Carolina amended its continuing education rules to exempt those 65 and older who have held a license for 25 years.
• Oklahoma passed legislation requiring insurance “consultants” to have an insurance producer license. Oklahoma’s interpretation uses the term “consultant” to also cover a role lay people might think of as “broker.” Brokers are a loosey goosey piece of the industry that is tricky to pin down, definitionally. 
• Washington residents may see their individual premiums increase as 14 health insurers in the state filed a rate increase request for an average of 7.16 percent with Insurance Commissioner Mike Kreidler. Check out the state’s full release page to see the rate change requests and which companies made them.
• New Mexico issued a bulletin reminding any business entity or individual that designates New Mexico as their resident state that their principal home must be in that state, period, if they intend to hold a resident license there. “The Office of Superintendent of Insurance has reason to believe that there may be applicants for a New Mexico Resident Insurance Producer License who do not meet residency requirements,” the bulletin said. Penalties could include having your license suspended or revoked. If only there were a way to ensure your producers were meeting adequate requirements for their insurance licenses!
• New Hampshire issued a bulletin reminding insurance companies, agencies, and individuals that anyone subject to a state investigation is required to respond to state requests for relevant information within 10 working days. 
• Delaware clarified in state law that the state allows non-residents to establish a resident license in Delaware if they are employed by a Delaware-addressed business. However, the state also clarified that a P.O. Box is not sufficient to establish a resident address. Check out Delaware’s other address specifications in the AgentSync Compliance Library.
• Massachusetts has announced their renewal and termination season, with terminations due June 30, 2022, and renewals due in the period spanning from July 19, 2022 to Aug. 31, 2022. For more on Massachusetts appointments, check out the Compliance Library.
• Louisiana’s legislature has repealed the entirety of the state’s insurance pre-licensing requirements. Previously, the state required those seeking most license lines of authority to take hours of prelicensing, and present a certificate of course completion to the exam proctor in order to sit for the appropriate insurance exam. Louisiana also announced the state’s appointment renewal period is July 1, 2022, to Aug. 2, 2022.

While these points of interest aren’t comprehensive, our knowledge of producer license and compliance maintenance is. See how AgentSync can help make you look smarter today.