Regulatory Roundup: TikTok Auto Thefts, ACA Transitional Exemption Policies, and Vermont Captives

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 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. 

Connecticut warns against auto coverage changes connected to TikTok

The Connecticut Insurance Department (CID) issued a consumer alert about auto insurance for Hyundai and Kia cars in the face of a TikTok trend that is causing consternation for car owners and insurers alike.

Late 2022 saw the rise of a TikTok challenge of criminals of all ages exploiting a security vulnerability in certain models of 2010-2021 Kia and Hyundai cars. Social media wannabes-turned-felons demonstrated they could hotwire these vehicles in a matter of seconds, leading earnest car thieves and social media graspers alike to post videos of their adventures.

Although the vehicle manufacturers are rolling out updates designed to thwart these crimes, several fatalities have been linked to the trend. One Chicago jurisdiction official claimed thefts of certain models were up more than 800 percent in a single month, with many of the thefts attributable to one very persistent 11-year-old.

Connecticut noted that the trend has had its repercussions in the insurance sphere.

“The CID is aware that in some states, automobile insurers advised their agents and state insurance regulators of their intent to cease providing coverage or to increase rates for Hyundai and Kia vehicles owners,” said a news release from the Connecticut Insurance Department.

The consumer alert served to remind both consumers and, perhaps more subtly, auto insurers, that the CID hasn’t approved any Kia- or Hyundai-specific changes in its market, to rates or to coverage. 

“To date, no Connecticut insurance carrier has taken the necessary steps to stop offering or increase rates for automobile policies insuring the affected Kia and Hyundai models. If any Connecticut carriers have taken action regarding coverage or rates for the affected vehicle models, the carriers must immediately stop and contact the CID to discuss plans addressing any affected policyholders and consumers.”

Michigan orders the extension of Affordable Care Act transitional policies through Dec. 31, 2023

The Affordable Care Act (ACA), the absolute titan-sized regulation that reshaped the topography of America’s health insurance landscape, is still “optional” for a subset of plans. The original ACA order included grandfathered exemptions for specific types of plans and some “transitional policies” with provisions that would sunset over time.

Every year or so, the Centers for Medicare & Medicaid Services (CMS) issues guidance that serves as a multi-phase “transitional policy” to continue some of these non-grandfathered insurance coverages. Michigan’s Department of Insurance and Financial Services (along with other states, but they’re the one who sent out the news release, so bear with us) has adopted these transitional guidelines every year, and this is no exception.

The continuation of these transitional policies allows them to operate through Dec. 31, 2024, and exempts them from following ACA provisions such as:

• Fair health insurance premiums
• Guaranteed availability of coverage
• Guaranteed renewability of coverage
• Prohibitions on pre-existing condition exclusions or other discriminations based on health status
• Prohibitions of discriminations against individual participants and beneficiaries based on health status
• Non-discrimination in healthcare
• Comprehensive health insurance coverage
• Coverage for individuals participating in approved clinical trials
• Single risk pooling

Transitional policies also are exempt from some state laws in Michigan, such as standards about guaranteed renewability, network adequacy standards, open enrollment periods, and permissible rating factors.

As Anita Fox, the DIFS Director, noted in the bulletin, although an insurer may be granted this extension if they apply to CMS and file the requisite paperwork with the state, there is nothing that says insurers have to continue these policies. And there are plenty of ACA requirements the transitional plans still must adhere to, such as the prohibition against annual dollar limits on essential health benefits, mental health parity requirements, prohibitions on excessive waiting periods, or prohibitions on pre-existing conditions.

Insurance is an industry where state-by-state regulation isn’t always everyone’s favorite, but, as notices like this serve to remind us, it doesn’t always get less complicated even when Congress sets a federal standard.

Michigan regulatory action

In other Michigan news, an insurance sales agency came under the Department of Insurance and Financial Services’ scrutiny after being accused of selling out of compliance with the state’s licensing laws. While the principal agent holds a license, the DIFS Statement of Findings said the agency holds itself out as an insurance producer, despite not operating with an agency producer license. State license compliance can be tricky to navigate, we understand. Make it easier with AgentSync!

Vermont is very proud of its captives – no kidnapping necessary (probably)

Vermont has a lot going for it. It’s incredibly scenic. It has skiing. It has quaint agricultural sites. It’s also the largest captive insurance market in the country, and third-largest worldwide.

Betcha didn’t know that … unless you get the Department of Financial Regulation’s newsletter, in which case that is a prominent and recurring point of pride. The state released its market summary from 2022, showing the DFR licensed 41 new captive insurance companies, making it home to 639 licensed captives.

What is captive insurance?

When a business or group takes on the risk of underwriting its own members for self-managed insurance as opposed to using a carrier as the insuring third party, it’s called captive insurance.

Among the industries that use a captive model in Vermont, healthcare is the most avid, followed by construction and real estate.

Members of the Vermont captive industry also represented the state’s market in Mexico for a trade mission and industry sharing event designed to encourage uptake in the insurance model in Latin America.

Other state changes

Texas: surplus lines insurers must remember to complete their end-of-month reporting through the Surplus Lines Stamping Office of Texas (SLTX) SMART system, as the SLTX’s Electronic Filing System (EFS) no longer supports reports for monthly invoices, detail policy activities, policy transaction activities, duplicate policies, or outstanding ineligibles. SLTX’s update asserted the rest of the EFS features remain available until May 1, 2023, but surplus lines stakeholders will want to transition to the SMART system before then. Additionally, SLTX has a new mailing address: 1601 E Pflugerville Pkwy, Suite #3301 Pflugerville, TX 78660

California: surplus lines stakeholders will notice filing requirements have changed slightly as the California Surplus Lines Association (SLA) has re-adjusted the categories for coverage, integrating more miscellaneous coverages into specific categories and tightening the miscellaneous general category. The new classifications change coverage codes from a three-digit system to a four-digit system. For full old vs. new code documentation, see the guide.

Nevada: Department of Business and Industry Director Terry J. Reynolds appointed Scott Kipper to the position of Insurance Commissioner effective Feb. 27, 2023. Kipper formerly served as Deputy Commissioner for Operations in the Washington Office of the Insurance Commissioner under the direction of Washington Insurance Commissioner Mike Kreidler. 

Alabama: Department of Insurance staff welcomed Sanjeev Chaudhuri as their new Chief Actuary, joining the department from 20 years in the private insurance industry, most recently as Chief Actuary at Alfa Insurance. The Alabama DOI welcomed Larry Chapman Jr., also an Alfa Insurance alum, as the department’s Deputy Commissioner.

Colorado: Division of Insurance has adopted two emergency regulations to bolster the Colorado Option standardized plan. Emergency Regulation 23-E-01 establishes the rules around the standardized bronze, silver, and gold health benefit plans the state will require all carriers to offer if they offer other individual and small group health benefits plans in the state. Emergency Regulation 23-E-02 establishes the state’s rules regarding its new requirements for carriers to reduce their premiums over time, adjusted for inflation. Commissioner Michael Conway also adopted in February a bulletin to address religious exclusions to health insurance coverage of infertility services. The bulletin explains that a “religious employer” in the state’s Insurance Cover Infertility Diagnosis Treatment Preserve and Implementation of Infertility Coverage laws has the same meaning as in federal law. 

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.