Regulatory Roundup: Delaware LTCI Office, Washington Assignment of Benefits and Fraud

State-by-state variations of laws, compliance protocols, industry transparency, and general regulatory culture 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, instead, as a sampler platter of regulation. 

Also important to note: If we’re recapping interpretations of legal decisions, this is some armchair insurance speculation and not at all legal advice. If you need legal advice, get a lawyer. 

Delaware tackles long-term care insurance with special office

Long-term care insurance has been a difficult topic between carriers and regulators for some time, as long-term care’s skyrocketing costs make profitability difficult and drive up premiums.

As this tension has increased, states have taken different approaches to regulating long-term care insurance carriers, and carriers have retooled contracts in an attempt to remain profitable while providing adequate benefits for consumers. This has had a follow-on result of making products more complex than ever. However, with additional complexity comes higher chances that consumers will misunderstand the products they’re buying.

In Delaware, Commissioner Trinidad Navarro is taking a crack at this challenging situation by creating the Office of Long-Term Care Insurance.

“Long-term care insurance is an increasingly confusing and complex form of coverage. Much like we have dedicated teams for assisting consumers with home and auto insurance, health coverage, and Medicare, increasing contact from residents has shown us the necessity of highlighting the long-term care insurance support we can provide to Delawareans,” said Navarro in a news release.

The office will staff state employees who can help explain to consumers what a basic contract may entail, some of the trickier parts of understanding coverage, and help consumers understand their needs and wants before hunting down a contract with an insurance carrier. 

Washington spotlights assignment of benefits concerns

The practice of assignments of benefits is a bit fraught. Sometimes, it’s a saving grace that allows overwhelmed policyholders to shuffle the drama of insurance claims and reimbursement filing off onto a lawyer or contractor. And sometimes it’s a great way to incentivize a third party to take a carrier for all they’re worth and leave consumers high and dry with their proverbial assets exposed.

If you remember, it’s this latter concern that shook up certain aspects of the Florida homeowner insurance market and prompted some special session legislative action in that state in 2022.

Washington, too, is approaching the problem of opaque assignment of benefits scenarios. Commissioner Mike Kreidler issued a news release to warn consumers to read the fine print and understand their options before signing any assignment of benefits paperwork with anyone.

“An assignment of benefits, in the right hands, can be an advantage to homeowners recovering from a devastating loss,” Kreidler said. “Unfortunately, it can also result in people losing their rights and their ability to make decisions in the claims process, and their ability to determine how they’re made whole after a loss.”

Among best practices for consumers to keep in mind: 

• Waiting for a third party to negotiate claims payments can delay repairs
• A third-party should never require an assignment of benefits to perform work (big fat red flag!)
• Be extra cautious about out-of-state home repair professionals

Washington collars criminals for insurance fraud

The Washington Office of the Insurance Commissioner issued a news release to trumpet the state’s successful takedown of three fraudsters. Because we’re all compliance nerds here, we’re down for a good tale of justice: served warm and saucy.

Fraudster No. 1

The first offender is a man who has been on the Commissioner’s Most Wanted list for 11 years. The former Seattle resident attempted to file a stolen vehicle claim with his insurer on two vehicles: a Honda motorcycle and Toyota RAV4. After paying out for the motorcycle, the insurer discovered evidence the man had shipped both vehicles out of country and referred him to the state for fraud charges. 

While he paid back the fraudulent claims payment, he spent the next decade dodging the state’s justice. However, irritation over the way the arrest warrant impacted his ability to renew his passport and travel goaded him into contacting the state and pleading guilty to attempted insurance fraud. The man was sentenced to 24 months of probation and ordered to pay $500 in court fines.

Fraudster No. 2

Our second offender tried a similar and classic theft claim fraud. He filed a claim on behalf of his parents, reporting that a burglar had carried off more than $40,000-worth of newly purchased luxury goods. The carrier began paying out on the claim, only to discover the reported items had been purchased and then immediately returned to stores. After a stop-payment order, the carrier referred the case to the Commissioner’s Criminal Investigations Unit.

This offender was sentenced to serve one day of a 365-day jail sentence, 24 months’ probation, and 40 hours of community service.

Fraudster No. 3

Our third offender wrecked her car while uninsured. She purchased an auto policy four days later and tried to pass off the vehicle damage as having happened the day after her policy purchase, but was easily found out with the assistance of the police report from the crash. The state sentenced her to 24 months of probation and 80 hours of community service.

Other state regulatory changes

Alabama changes to the licensing requirements for individuals and business entities involved in limited lines credit insurance took effect July 1, 2024. One fun tidbit: Individuals and agencies that are already licensed with life, disability, property and casualty, or personal lines of authority can sell credit insurance for their specific licensed LOA without further licensing. The state also posted a bulletin to help carriers navigate new federal rules for disclosures on short-term limited duration insurance policies.

Arkansas issued a bulletin to reverse a previous state interpretation. Moving forward, property and casualty and surplus lines insurers and producers should consider their fees and commissions, including inspection fees, subject to the state’s 20 percent aggregate limit. The state has also adopted the NAIC’s model for regulating AI, meaning carriers and agencies using artificial intelligence will need to be mindful of how their tools affect outcomes that might run afoul of unfair trade practices or unfair claims settlements as outlined in existing state law.

Colorado issued a bulletin to clarify that the state’s mandate that health insurance carriers provide abortion services without enrollee cost-sharing doesn’t require state defrayal for carrier costs. The state also posted bulletins with form renewal notices for carriers to use when re-enrolling consumers for nonsubsidized Colorado Option health benefit plans and off-exchange Silver Enhanced Savings health benefit plans.

Connecticut issued a news release to recognize the Assistant Deputy Commissioner and Director of the Captive Division, Fenhua Liu, for her award as one of 2024’s Influential Women in Captive Insurance. Congratulations!

Delaware has updated its legal text to reflect a new law that allows insurance producers to issue claims checks without needing to hold a claims adjuster license.

Georgia has issued a bulletin overruling a previous bulletin from 2022 – essentially Commissioner John King clarified the circumstances when a surplus line insurer or broker could charge a fee on top of a premium, and how they have to disclose that information to the consumer. The TL;DR: It better not be a surprise.

Hawaii legislation went into effect mid-July to require reinsurance intermediary-managers to furnish the commissioner with any requested reports, as well as requiring third-party administrators (TPAs) to hold a $100,000 surety bond for their initial license period and a minimum $300,000 bond for every renewal period.

Louisiana has joined the 45 other states that have adopted the NAIC’s Suitability in Annuity Transactions Model Regulation. We love to see the standardization! 

Maryland legislators repealed prelicensing and minimum experience rules for Maryland producers, and a bulletin states the change is effective Oct. 1, 2024. While the department will no longer post lists of state-approved courses, would-be producers can still seek out their own prelicensing prep courses to prepare for the state insurance exam.

New York will prohibit carriers from imposing prior authorizations or any prohibitions or restrictions on enrollees from acquiring antiretroviral prescription drugs beginning Jan. 1, 2025. The 2023 law enacting this prohibition aims to break down barriers to receiving treatment or prevention of HIV or AIDs.

North Carolina is joining the burgeoning cohort of states that’ll allow NIPR to process DRLP and primary name changes. The state has also removed its prohibition on holding both an adjuster and producer license at the same time. We love to see it! And if you need some help keeping track of those adjuster-producers, boy howdy do we have the software for you…

Ohio in August removed appointments from the NIPR Producer Database that have been inactive for more than five years, affecting approximately 13 million inactive appointments. For insurance carriers, you might still be lugging around active but ineffective appointments. Find out how AgentSync can help you trim your administrative costs for ineffective producers… 

Oklahoma has issued amended rules for securities brokers and investment advisor representatives. Many of the changes reflect FINRA rules for multiple exams, continuing education, branch supervision guidelines, and professionals who’ve taken the securities exams but step away from the industry for multiple years.

Pennsylvania legislation effective Jan. 11, 2025, will set standards prohibiting anything that looks like a premium rebate or an inducement to purchase a policy. New limits allow meals, gifting, charitable donations, or raffle winnings per prospect or customer up to $125 on an aggregate, annual basis. And advertising rules will prohibit “free” or “no cost” language on any marketing materials put out by an insurance professional.

Washington Commissioner Mike Kreidler fined a home and appliance warranty company $200,000 for improper claims denials and failing to register as an insurer with the state. The federal Department of Health and Human Services updated requirements for nondiscrimination, so Washington also updated the state’s required disclosure for health insurance carriers.

Wisconsin released its list of administrative actions for July, and it’s worth flagging that a lot of offenders had their license revoked and had to pay fines for failure to report admin actions from other states. SIGH. If only they had read up on how to self-report and save their licenses!

SILA announced a new list of SILA Fellow designees and SILA Associate designees. Congrats to the Fellows: Dustin Barkman, Lesa Brown, Ted Corsi Jr., Jason Flanagan, April Otto, and Kimberly Skarren. And congrats to the Associates: John Ace Abalos, Mark Allen Abbas, Shelly Ade, Dustin Barkman, Jennifer Barton, Chase Gaca, and Christina Martinez.
While these points of interest aren’t comprehensive, our knowledge of insurance producer and variable lines broker license and compliance maintenance is. See how AgentSync can help make you look smarter today; head over to the Compliance Library and wrastle up some state-by-state regulation and more jurisdictional updates.