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.
States begin responding to NAIC Climate-Related Financial Disclosures
The National Association of Insurance Commissioners’ (NAIC) spring meeting in Kansas City kicked off a firestorm of opinion as the group adopted a new standard for insurance carriers to report climate-related risks. States that adopt the Climate Risk Disclosure Survey will require carriers to disclose their level of risk and vulnerability as it pertains to the changing ecological environment.
The move aimed to bring the NAIC standards into closer alignment with the international Task Force on Climate-Related Financial Disclosures. Neither the NAIC standards nor the international Task Force is without its own controversies in the American financial community. Commissioners and state governments are responding to the survey with adoption or statements of rejection.
Regulators of all political stripes and from across all states were involved in the survey updates, something that seems worth noting in the current somewhat-tense political environment. The AgentSync blog is sure to return to the NAIC Climate Risk Disclosure Survey as climate regulations (and the planet) heat up.
Colorado investigating Bright Health, investing in data protection
The Colorado Division of Insurance (DOI) announced a $1 million fine of Bright Health, a health insurance carrier, following a long-term investigation of the company.
A news release from the Colorado DOI released details of the formal agreement between Bright Health and the state.
The state said because Bright Health grew so rapidly, particularly during the COVID-19 pandemic, it hadn’t overcome some of the communication challenges that come with growth to stay properly in compliance. The DOI has received more than 100 complaints from consumers and health care providers alike, which “indicated systemic operational problems” at the life and health insurance provider.
Bright has made efforts to improve, which the DOI recognized, but the insurer hasn’t fully remedied the systemic issues, including:
- Failure to pay claims in accordance with Colorado law (in 2021, the DOI identified 850 “clean claims” – i.e., claims that were clearly covered by policy and had all necessary administrative information – that Bright Health failed to pay in a timely manner (which, according to Colorado law, is within 30 days if filed electronically)
- Noncommunication with insureds
- Inability to process consumer payments and handle accounts, including canceling accounts or filing erroneous charges
- Untimely claims processing for physical and behavioral health coverage, including not following American Society of Addiction Medicine guidelines for treating opioid and other substance use disorders
The state intends to fine $500,000 of the $1 million total upfront, but, if Bright Health makes the necessary improvements over the course of the year, the state will waive the remaining $500,000 payment.
“With the number and variety of complaints the Division received, our investigation had to dig deep into many facets of their business,” said Colorado Insurance Commissioner Michael Conway in the news release. “With this fine and the formal agreement outlining how Bright is going to fix their problems, they should not only be able to clear their backlog of complaints and payment issues, but be in a better position to serve Colorado consumers going forward.”
Data protection measures include restricting insurer use of consumer data
In other Colorado news, the DOI is making good on the state’s promise to restrict insurer use of consumer data. With the “Restrict Insurers’ Use of External Consumer Data” law going into effect, the state has contracted with a tech firm to proactively take steps that shield data points such as race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression.
Cathy O’Neill and O’Neil Risk Consulting & Algorithmic Auditing (ORCAA), a tech firm that helps “manage algorithmic risk,” is contracting with the state to help both the state and insurance carriers establish a clear guideline for how to limit data gathering that is harmful to vulnerable populations while also allowing them room to make processes both for themselves and consumers efficient.
“We are honored and proud to be part of the Division’s important work on this landmark law. Getting to clear, industry-specific standards about fairness and discrimination in the context of AI and big data is crucial – both to protect consumers, and to give companies clarity on what’s expected of them. Colorado’s law is a big step in the right direction,” said O’Neil, ORCAA’s CEO, in the state’s news release. “We hope to see more states and industries follow their lead.”
Another new insurance law in Colorado puts stricter guardrails on how and when carriers should notify policyholders to necessary state-approved changes in coverage. The regulation will go into effect by the close of May and includes a template for notification, including side-by-side comparisons of old vs. new plan coverage or alternatives for those whose plans are discontinued.
Washington governor signs insurance commissioner’s proposal for state guaranty association extension
The Washington governor on March 24, 2022, signed a bill sponsored by Sen. Marko Liias and supported by Washington Insurance Commissioner Mike Kreidler, which the Washington Office of the Insurance Commissioner (OIC) championed on its legislative priorities page. The legislation extends the Washington Life and Disability Insurance Guaranty Association membership to long-term care insurance (LTCI) companies.
LTCI is an insurance product that aims to pay for long-term care stays in nursing homes, adult day care, and at-home care for its insureds. It’s difficult and expensive to procure, and, even with more extreme pricing models, is often underpriced for the number of policyholders who wind up needing institutional care. As the few remaining insurers for the LTCI space retool or run into limitations on these products, Washington is moving to protect the remaining consumers with coverage.
“Long-term care insurance companies have impending insolvencies that threaten benefits due to policyholders in Washington. The OIC’s proposal is a fair way to ensure that seniors and people living with disabilities who have purchased insurance and paid their premiums in good faith can rely on their benefits if their insurer fails or becomes insolvent,” said the Washington OIC legislative priorities page.
Washington is far from the only state grappling with this issue. For some general LTCI speculation, we have that covered, and for one commissioner’s perspective on how it affects their state, Wyoming’s Commissioner Jeff Rude weighed in. And, if you’re interested in learning more about state guaranty funds and the solvency process, read more here.
Florida CFO issues statement on Elon Musk’s takeover of Twitter
Florida Chief Financial Officer (CFO) Jimmy Patronis led off an April missive with a copy of a letter he sent to Elon Musk. While we aren’t interested in wading through the whole Elon-vs.-Twitter-vs.-the SEC, we thought the statement from Patronis might bring levity to someone’s day:
“I sent a letter to Elon Musk encouraging him to move Twitter’s corporate headquarters from California to Florida following his purchase of a multibillion-dollar stake in Twitter, making him the largest shareholder of the social media company and a member of Twitter’s Board of Directors,” said Patronis in his e-newsletter. “I think Twitter’s culture could benefit from being in a state that values liberty and has not been taken captive by the thought police (unlike California). There is no Ministry of Truth here. Just freedom, beaches and a lot of opportunity. I have no doubt the Twitter team would thrive in the Sunshine State.”
Other state updates:
Arkansas, Nevada, and Ohio have updated their termination and appointment deadlines for insurance carriers, check our running list of appointment and terminations dates for more.
South Carolina Director of Insurance Ray Farmer announced his retirement, effective April 15, 2022.
Hawaii announced producer license reactivations – when a producer has reapplied for their license that passed its expiration deadline – will now only be accepted via electronic application means.
The Texas Department of Insurance (TDI) has issued a data call, due at the end of May 2022, for Companies writing commercial property or business owners insurance in Texas and certain farm mutuals writing property insurance. The data will be used by the TDI and the Texas Windstorm Insurance Association (TWIA) for various statistical purposes, including calculating TWIA memberships and understanding catastrophe costs and losses in Texas. If you think you’re subject to the data call, contact TDI’s Data Services team at DataCall@tdi.texas.gov or 512-676-6690 or check out the data call instructions.