The 2014 Fall National Meeting of the National Association of Insurance Commissioners took place in Washington, D.C. from Friday, November 14, to Wednesday, November 19. A variety of issues affecting independent agents were discussed. Some important issues and points are highlighted below. If you have any questions or concerns do not hesitate to reach out.
Producer Licensing Issues
A summary of all the actions taken during the Producer Licensing (EX) Working Group meeting can be found here. A summary of all the actions taken during the Producer Licensing (EX) Task Force meeting can be found here. Two issues of note from the summary links are noted below.
Appointments
Under the Producer Licensing Model Act (PLMA), an appointing insurer shall file a notice of appointment within 15 days from the date the agency contract is executed or when the first insurance application is submitted. The committee discussion indicated that some states allow appointment within a certain number of days of the first business being written (referred to as just in time or JIT), some states require appointment upon contract execution, and yet other states require appointment once active solicitation has begun. Also, some states have different standards for agency appointments and individual agent appointments.
The general industry practice is to allow the insurer an option not to appoint a licensed agent until the first piece of business is submitted. However, the differing interpretation of the PLMA by state insurance departments has caused considerable confusion as to when appointments are required.
PIA supports using JIT or a similar appointment standard because requiring appointment in every jurisdiction that a contract may include, even if the independent agent is not actively soliciting in that state, would be unduly burdensome and create an unfair advantage for carriers who use captive agents without contracts.
Following the discussion, the working group will be surveying state insurance departments to determine how the state interprets the relevant appointment language of the PLMA and why the state does so. The working group will also ask departments what is considered compliant from a market conduct perspective.
Opening the PLMA up for amendment was mentioned, however, the committee seemed to favor an approach of that did not require that. Instead, committee members suggested updating NAIC guidance and FAQs on appointments depending on the outcome of the research.
Uniformity
The National Insurance Producer Registry (NIPR), a public-private partnership that facilitates producer licensing, asked for help from the NAIC on addressing certain issues related to uniformity.PIA has a seat on the NIPR Board of Directors and supports the organizations initiatives in this sector. The majority of the issues relate to business practices and lack of technical uniformity among state licensing systems. NIPR will be working with the NAIC and state insurance departments to promote certain uniform practices, such as making the license renewal date in every state the last day of the producer’s birth month.
Cybersecurity
The NAIC on November 19 formed a special task force to help coordinate insurance issues related to cybersecurity. The task force will make recommendations and coordinate NAIC efforts regarding: the protection of information housed in insurance departments and the NAIC; the protection of consumer information collected by insurers; and collecting information on cyber-liability policies being issued in the marketplace.
Price Optimization in Auto and Home Insurance
On October 31, the Maryland Insurance Administration (MIA) issued a bulletin alerting property and casualty insurers that the MIA believed price optimization to be an unfairly discriminatory practice in violation of state law. Price optimization refers to the practice of varying rates based on factors other than the risk of loss — such as the likelihood that policyholders will renew their policies. Maryland law prohibits discriminating among insured of the same class based on something other than actuarial risk. The bulletin stated that this practice is most common in auto and home insurance but some evidence of it has been found in commercial lines. Bulletin 14-23 can be found here.
The bulletin was a topic of discussion during the State Government Liaison Committee as well as other committees with multiple state insurance commissioners inquiring about price optimization issues. Consequently, we may see other state insurance departments consider this issue.
Ride Sharing (and Other Sharing Services)
The newly formed Sharing Economy (C) Working Group set out their preliminary objectives for 2015. The working group is veering away from formulating a model law due to the rapid pace at which ride sharing, car sharing, and home sharing are developing. Instead, the working group is aiming for the following timeline in 2015:
- By March 2015
- Develop and take comment on a white paper regarding ride and car sharing insurance principles for state legislators and regulators, which should include workers’ compensation and cell phone use issues and concerns
- By August 2015
- Develop white paper on home sharing and insurance issues
- Report on state-by-state differences regarding notice requirements for home sharing and short term rentals
- By November 2015
- Consider model guidelines for home sharing, ride sharing, and car sharing
Smart Disclosures
The NAIC Property and Casualty (C) Committee, Transparency and Readability of Consumer Information Working Group discussed Smart Disclosures and efforts by state insurance departments to move toward requiring Smart Disclosures. Smart Disclosure initiatives have been pushed by the federal government since 2011 as a way to make it easier for consumers to compare the value of different products, for example tools that allow consumers to compare specifics of certain coverage provisions. Smart Disclosures also focuses on using data analytics to help consumers make informed choices. More information on the federal government efforts in this area can be found here.
Officer Election
Annually, at the fall meeting the NAIC elects its officers. The newly elected officers will assume their duties on Jan. 1, 2015. The NAIC 2015 officers are:
- MontanaState Auditor and Commissioner of Securities and Insurance Monica J. Lindeen, President
- Pennsylvania Insurance Commissioner Michael F. Consedine , President-Elect
- Kentucky Insurance Commissioner Sharon P. Clark, Vice-President
- Wisconsin Insurance Commissioner Ted Nickel , Secretary-Treasurer
Other Issues
Other important issues not summarized here included discussion of international insurance issues, PEO regulation, surplus lines regulation and exempt commercial purchasers, and ACA implementation. If you have any questions or concerns regarding any of these issues do not hesitate to reach out.