Claims And Issues

GODSPEED, BOB HUNTER

After half a century of distinguished public service including positions as Director of Insurance at the Consumer Federation of America, and as a member of and contributor to the National Association of Insurance Commissioners, and as the Texas Insurance Commissioner, Mr. J. Robert "Bob" Hunter is retiring.

          I was not aware of all of his many accomplishments until now, when he is retiring.  Here's a brief look at the highlights of Bob's public service record:

1971:  United States Federal Insurance Administrator.  Bob would lead the Federal Insurance Administration first under President Carter, then under President Ford.

1980:  Bob founds the National Insurance Consumer Organization (NICO) and becomes its head in 1982.

1995:  Bob transitions into a post in which he would serve for the next 27 years:  Director of Insurance, Consumer Federation of America (CFA).

1980 through now:  Bob never asked for compensation over his more than 40 years of work with NICO and CFA.

Along the way, Bob served as Texas Insurance Commissioner.

          That is enough.  That is probably already more than Bob would want to have said about him, being a humble person.  This tribute will be short because he would want it that way.

          His professional career showed his enduring belief in the wisdom of insurer good faith.

          Godspeed, Bob Hunter.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

"INSURANCE CLAIMS AND ISSUES," THE BOOK: COMING IN 2016!

 

 Storm Clouds lined up over the Gulf of Mexico.  Photograph and text copyright 2015-2016 by Dennis J. Wall.

I am hard at work on an anthology of the best blogs from "Insurance Claims and Issues."  The anthology I submit to my publisher will keep all hyperlinks intact, including links to the Insurance Claims and Bad Faith Law blog.  When articles posted on Insurance Claims and Bad Faith Law blog are important to the anthology of "Insurance Claims and Issues," I am including them in the anthology too.

As each previously posted article is updated, the posted articles will remain just as available here as they always have been.  New articles will benefit from me being better informed and better equipped to discuss future insurance claims and issues.

I have contracted with Thomson Reuters (West Publishing Company to those fortunate to have the experience) to publish "Insurance Claims and Issues," the Book, in the late Spring or early Summer of 2016.  Best wishes to everyone for a joyous and Happy New Year!

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.

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CYBERINSURANCE: MANY DATA-LESS RISKS TO UNDERWRITE & PREMIUMS TO CHARGE.

 

 Image by NASA.

A white paper on the topic of "Cyberinsurance" provided by the National Association of Insurance Commissioners this year highlights the difficulties for insurance companies in underwriting the stuff.

The starting point of the question comes toward the end of the NAIC's "topic" paper or white paper.  The NAIC reports that "cyber risk remains difficult for insurance underwriters to quantify due in large part to a lack of actuarial data."

Insurers "compensate" for the lack of facts surrounding cyber risks and cyberinsurance "by relying on qualitative assessments".  Translated into English, this means that insurance underwriters understandably enough substitute opinions for facts because they have so few facts.

"Managing cyber risks through insurance is relatively new," the NAIC acknowledges.  The market for cyberinsurance "is expected to grow dramatically".  The problems in this area come from the risks to be assumed, in more ways than one.  "With each announcement of a system failure leading to a significant business loss, the awareness grows."  Note the NAIC's quiet but exclusive emphasis on "significant business losses" here.

Yet, the risks to be assumed under one or more forms to be determined in the burgeoning field of cyberinsurance are so broad and spreading so wide as to include risks to individual persons as well as to businesses.  The NAIC paper even mentions the following cyber risks, among others:

• Hacking or inadvertent disclosure of personal information.
• Business interruption.
• "Introduction of malware, worms and other malicious computer code."
• "Lawsuits alleging trademark or copyright infringement."

Clearly, many of these sorts of risks affect persons as well as business entities.  Further adding to the island of unknown risks, so to speak, are pressures to protect information of all kinds, from personal information to trade secrets; to repel the sources of "cyber-attacks," including other nations, terrorist and other organizations, criminals, "and activists"; and to protect the policyholder's money including to prevent unauthorized access to the policyholder's and others' money.

The NAIC attempted to clarify the area in 2015 beyond a paper on "Cyberinsurance," however.  In April, its Cybersecurity (EX) Task Force issues its Principles for Effective Cybersecurity Insurance Regulatory Guidance.  The regulatory guidance in question is directed to "insurers, producers, and other regulated entities".

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of an anthology in progress of "Insurance Claims and Issues" articles, to be published by Thomson Reuters in 2016.  All rights reserved.

ACCI: RESEARCH BEFORE EVALUATIONS INCLUDING INSURANCE COVERAGE.

         

               To say again, I had the good fortune to attend the annual meeting of the American Council on Consumer Interests (“ACCI”) in Clearwater Beach, Florida last week.  The ACCI assembled what I think is the nicest group of people to be around; if they are not in first place for “nicest” in my experience, I cannot recall who would be.

               The ACCI members as a group shied away from labels.  They did not seem to want to be pinned down even as “academics” or as “regulators.” Their membership is united in its devotion to scholarship regardless of labels.  They support one another’s research projects as they focus on the results of their collective research.  In short, they focus on evidence.

               A good illustration of their approach came when the ACCI gave an award to Sandy Praeger.  Praeger has been a Kansas State Representative, a Kansas State Senator, an elected Kansas Insurance Commissioner, and the Chair of the National Association of Insurance Commissioners.  Her acceptance speech exemplified her long and distinguished service.

               She spoke to the audience’s focus on evidence as a basis for conclusions.  The special focus of an anecdote she told was on evidence as a basis for policy.  Specifically, evidence as a basis for coverage under an insurance policy.

               Not long ago, the members of the Kansas Legislature shared the belief of many people that mental conditions are essentially too expensive to be covered by insurance and that there is no good result available even when insurance coverage is extended to mental health treatments.

               In reality, mental health conditions are generally every bit as treatable as physical health conditions.  There may not be a “cure” for schizophrenia or other mental illness, just as there may not be a “cure” for cardiac health issues.  However, persons with mental illness can be maintained just like cardiac patients can be maintained.  A person who had a heart attack has a cardiac condition for the rest of their lives, whether or not they ever again present the symptoms of cardiac disease, in much the same way that a person with a mental health condition will always have a mental health condition.  Yet both persons can be maintained throughout their lives and there is no more reason to deny insurance coverage to one as to the other including annual or maximum caps on coverage for treatments.

               Ms. Praeger and others presented the evidence in this regard to the members of the Kansas Legislature.  It took awhile, but several years later, the Legislature passed legislation to prohibit arbitrary caps on coverage for mental health treatments that are not similarly imposed by health insurers on persons receiving treatment for physical conditions.

               Evidence trumped opinions which were not based on actual evidence.  That is worth remembering.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of “Lender Force-Placed Insurance Practices” (American Bar Association 2015).  www.lenderforceplacedinsurance.com  All Rights Reserved.

Federal INSURANCE Laws to Preempt STATE Insurance Laws.

     State regulation of Insurance has been the norm almost exclusively.  Insurance Companies are rarely subject to specific Federal regulation.  See generally DENNIS J. WALL, 2 LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:16, "Statutory Preemption of the Common Law and of Other Statutory Causes of Action" (Third Edition and 2012 Supplement, West Publishing Company).

    That is about to change.

    Federal multistate Health Insurance Plans will be regulated by Federal Health Insurance standards.  This is a new development.  Federal Insurance Law will preempt conflicting State Health Insurance rules.  It is not a new development for Federal Law to preempt conflicting State Laws; it is a new development for there to be such a thing as Federal Insurance Laws.

    Federal Health Insurance Plans will be eligible for the new Health Insurance Exchanges being set up in the States under the Affordable Care Act, regardless of whether the Federal Plans meet State Health Insurance rules.  Robert Pear, "U.S. Prepares to Sponsor Health Insurance Plans" p. 23, col. 1 (New York Times Nat'l ed., Sunday, October 28, 2012).

    The Federal multistate Health Insurance standards have not, however, been made public.  The National Association of [State] Insurance Commissioners, or "NAIC," has publicly announced its concern over these unknown rules.   See generally the Health Insurance and Managed Care (B) Committee page on the NAIC website for general information about the Committee formed by the NAIC for this purpose.  The Office of Personnel Management ("OPM") is the Federal agency empowered to issue the new rules.  OPM has not released them.  See the OPM Healthcare and Insurance page, for general information offered by OPM on those subjects without specifics addressing the new Plans.

    However, it is publicly reported that:

• OPM will negotiate the premiums and benefits.
• OPM is "the agency that arranges health benefits for federal employees." 
• The Federal multistate Health Insurance Plans will be offered "to individuals and small employers" through the Health Insurance Exchanges being set up in the States under the Affordable Care Act.

Robert Pear, "U.S. Prepares to Sponsor Health Insurance Plans" p. 23, col. 1 (New York Times Nat'l ed., Sunday, October 28, 2012).

    This may not be the same thing as the public option for Health Insurance.  We do not know.  We may know more when the OPM issues Federal rules and regulations for comment, which ought to describe these Federal multistate Health Insurance Plans with more details than we have now.

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Medical Loss Ratio/Minimum Loss Ratio Health Insurance Regulation Recommended ...

,,, by the National Association of Insurance Commissioners, to which the United States Congress delegated the task.

   In recent original reporting posted here on October 22, 2010, I chronicled my unsuccessful efforts at "Tracking Down Health Insurance 'MLR' at the National Association of ... Insurance Commissioners" Fall National Meeting here in Orlando.

   The NAIC has apparently now sent a 43-page recommendation to Congress, accessible through this link: 

 http://www.naic.org/documents/committees_ex_mlr_reg_asadopted.pdf

.

   Time will tell what it means.

   The author is Co-Chair of the Health, Life and Disability Insurance Subcommittee of the American Bar Association Insurance Coverage Litigation Committee.

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Tracking Down Health Insurance "MLR" at the National Association of ...

... Insurance Commissioners at their 2010 Fall National Meeting at the wealthy Gaylord Palms Resort in Orlando, Florida.

   Tracking down the National Association of Insurance Commissioners yesterday on how they adjusted the "MLR" was not an easy task.  Their "media availability" (read:  Press Conference) was scheduled for Noon.  When I, a very new News Media badgeholder, showed up a few minutes before Noon, the Press Conference was already over.  I asked several people for a copy of the Commissioners' decision, or at least a copy of the model regulation that they voted on.  No-one there could provide either one.  It seems that at Noon, the NAIC members and their staff were on their way out of town, for the most part.  A few intrepid Insurance Commissioners remained for awhile, for example to see and hear the doings at the Florida Office of Insurance Regulation's Public Symposium on Hurricane/Catastrophe Insurance (to be posted in the future in a separate post).

   There was not so much as a Press Release available from the NAIC yesterday, Thursday, October 21, 2010 in Orlando where they were meeting.  Here is a copy they posted, under yesterday's date, on their controlled website.  As you can see, it does not say much about what the NAIC voted to include in or exclude from "Medical Loss Ratio Regulations".

   Here is a newspaper report published in print today, Friday, October 22, 2010 and Online yesterday by the Orlando Sentinel, carried in other Tribune-owned newspapers, reported by Linda Shrieves, "State Insurer Group Backs Proposed Rule" p. B7, col. 1 (Orlando Sentinel, Friday, October 22, 2010). 

   The report appears to make it look like the NAIC courageously required Health Insurance Companies to "spend at least 80 percent of a customer's premium on providing health care and medicines."  However, the NAIC did not do that; Congress did, when Congress enacted the Patient Protection and Affordable Care Act earlier this year.

   The linked report parenthetically also makes it appear that the president of America's Health Insurance Plans ("AHIP") appeared in person at the Gaylord Palms to object to this requirement, but that person is not to be found on the list of attendees, although other representatives of AHIP did attend and make themselves heard.

   So, it's back to Washington, D.C. for anyone who wants to continue to try to keep track of the MLR and what if anything is being done to or about it.

The author is Co-Chair of the Health, Life and Disability Subcommittee of the American Bar Association's Insurance Coverage Litigation Committee.

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Day 3 Original Reporting From the National Association of Insurance Commissioners...

... At Their 2010 Fall National Meeting at the overly posh Gaylord Palms Resort in Orlando, Florida.  This follows posts on this Insurance Claims and Issues Web Log on the first day of meetings, posted on Sunday, October 17, 2010, and on Insurance Claims and Bad Faith Law Blog, posted on the second day of meetings, on Monday, October 18, 2010.

   Title Insurance was on the NAIC committee agenda today.  The NAIC's Title Insurance Task Force considered a Private (Developer's) Transfer Fee Covenants proposal.  In testimony before the Task Force, it was stated that Transfer Fees are used by Developers to spread development costs or infrastructure fees.  They allow Developers to reduce the sales price of a house as part of the up-front price of the house and they reduce the Purchaser's Mortgage payments as well because they reduce the Principal.

   The benefits to original Purchasers are pretty clear.  They would pay less than they would otherwise pay under a program in which original Purchasers pay the total Transfer Fee in the original transaction, and subsequent Purchasers do not pay any part of it.   Several times in this morning's testimony, the witness made the point that America's Developers view the situation as more fair and equitable to spread the payment of their Transfer Fees across a range of both original Purchasers and subsequent Purchasers, rather than charging the original Purchaser the full capital recovery cost or Transfer Fee.  Use of Developers' Transfer Fee Covenants therefore results in a reduced sale price paid by the original Purchaser, he said.

   According to the testimony, 12 Million "homes" are subject to Transfer Fees today.  They are in widespread use, he said.  Developers have developed (you should pardon the expression) their Transfer Fee Covenants for 2.5 Million of those 12 Million houses, meaning that 2.5/12 Million houses are actually subject to Transfer Fees in favor of Developers today.  The remainder are to provide weight to Homeowner-Association-Dues-forced-agreements in Restrictive Covenants.  Apparently both types of Fees would "run with the land," i.e., each subsequent purchaser would take subject to them.  Transfer Fee Covenants made with Developers would impose a lien on the land for 99 years.  A "home" will sell an average of 8 times during that period, the witness testified.  That is why they would affect Title Insurance Companies.  Title Insurance Companies are charged with identifying clouds on title to real property like liens and other encumbrances.

    He also said, in response to persistent questioning, that an unpaid Transfer Fee becomes a lien on the property. 

   This morning's witness also testified in favor of the proposal by observing, again several times, that there is no evidence that consumers are harmed by Developers' Transfer Fee Covenants and that, to the contrary, he said, the purchase price paid by original Purchasers is reduced.

   On the other hand, after a few moments, I thought about subsequent Purchasers.  It may be true that no great amount of harm is caused to consumers by Developers' Transfer Fee Covenants of this kind, but clearly a little harm is caused to a lot of consumers under this proposal to spread out Transfer Fees.

   Fourteen States have reportedly passed absolute bans of the practice, however.  If Developers' Transfer Fee Covenants are so good for you, why did any State bar their Transfer Fees Covenants?

   The witness did not say.

   Parenthetically, that particular witness revealed after awhile that he was a Developer in Austin, Texas in very large planned communities.  I did not catch his name.  I thought he was a persuasive speaker with a difficult topic.

   Since Developers' Tranfer Fee Covenants were considered only in a Report at this time, no action was taken by the NAIC.

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Original Reporting From the National Association of Insurance Commissioners ...

... At Their Fall 2010 National Meeting in Orlando, Florida.

   The NAIC Fall 2010 National Meeting is being held at the Gaylord Palms Resort in Orlando.  Think South Beach in Miami or Southampton on Long Island.  The place where the National Association of Insurance Commissioners has chosen to meet seems like a rich person's fantasy of entitlement.

   For example, parking costs $12.00 a day.  Here at the Fall 2010 National NAIC Meeting, people pay $12.00 a day to hear them do the people's business.  It is our shared hope, I have no doubt, that good is certain to result if they orient their departments in the business of hearing the people, and at no charge.

   Additional random thoughts:

• A person can get some good information from reviewing a meeting's "list of attendees".  A person sure can tell, for example, which law firms practice in the Insurance Regulation area.
• There is a surprisingly small number of attendees from AHIP, or America's Health Insurance Plans.  It will be interesting to see the attendance at the Committee meeting scheduled later in the week to make recommendations to the NAIC, and thus to the Federal Government for whom the NAIC is standing in for some reason, on Regulations addressing Health Coverage and Premiums.
• There are also a relatively few number of people attending who are from PhARMA, the drugmakers' organization.  Maybe they do not have to attend.  The issues that interest them may have already been decided except for the finishing touches, thus the small contingent in attendance.

   Time will tell.

More to come from the National Association of Insurance Commissioners.  Please Read The Disclaimer.

"Retained Asset Accounts": Using Dead Soldiers' Survival Benefits for Profits.

   "Retained-asset accounts" are in the news recently.  See, e.g, Andrew Frye, "Lawmakers Question Value of Insurer Safety Net to Beneficiaries" (Bloomberg.com, Friday, August 13, 2010).  Retained-asset accounts hold and invest benefits payable by Life Insurance Companies to the survivors of dead soldiers.  The survivor may get a partial payment of death benefits.  Whether or not the survivor receives any of the benefits, in every case the survivor gets a "checkbook" from the Life Insurance Company to draw on the account, with a caution from the Life Insurer not to spend it all in one place.  In the meantime, the Life Insurer takes the money and invests it, making itself a profit.

   Retained-asset accounts are not protected by the Federal Deposit Insurance Corporation.  They may not be protected under State Guaranty Funds in the event of Insurer insolvency.

   If an informed survivor was aware of her or his choice, it seems like the best choice they might make is to take a payout and invest the benefits, by and for themselves.

   The National Conference of Insurance Legislators is set to consider a draft Model Bill of Rights of beneficiaries under retained asset accounts at NCoil's November meeting.  For its part, although the National Association of Insurance Commissioners has apparently issued press releases favoring retained-asset accounts, it will at least examine the issue.  The NAIC's inquiry began at its meeting in Seattle this month.  It is fair to predict that its inquiry will continue at its meeting in October in Orlando.  I plan to be there to report on what they decide.

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National Association of Insurance Commissioners in Orlando in October, 2010.

   The National Association of Insurance Commissioners has scheduled a National Meeting in Orlando, Florida.

   The NAIC will convene in Orlando in October, 2010.  The agenda is being finalized and so is unavailable at the time of this post.  When the NAIC makes its agenda available, it will be the subject of at least one post here.

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