OFFICE OF THE COMMISSIONER OF INSURANCE

OFFICE OF THE COMMISSIONER OF INSURANCE

Agenda Renewals & Nonrenewals Agent Licensing Changes Financial Examination Recommendations Recently Introduced Bills 2

Renewals & Nonrenewals June 17, 2008 Bulletin Renewals Renewals with altered terms Nonrenewals Not effective if: Less than 60 days prior notice Not reasonably precise reason(s) No notice of risk-sharing plan 3

Terminations - Proper Notices NEW policies in their first 59 days: s. 631.36 (2) (c), Wis. Stat. 10 days notice to cancel Underwriting reasons Nonrenewal/Anniversary: s. 631.36 (4) (a), Wis. Stat. 60 days notice to cancel Underwriting reasons 4

Terminations - Proper Notices (Continued) Count full days of coverage, do not count the day: The notice is sent, or; Coverage ends at 12:01a.m. Include any required notices about the residual market (WIP/WAIP) s. 631.36 (7), Wis. Stat. 5

Mid-Term Cancellations s. 631.36 (2), Wisconsin Statutes Acceptable Reasons Nonpayment of premium Material misrepresentation Substantial breach of contractual duties, conditions, or warranties Substantial change in the risk 6

Nonpayment of Premium - NSF s. 631.36 (2), Wis. Stat. Done at any time during the term New policy If bound, must provide written notice of cancellation At least 10 days notice required Renewal policy If renewal notice states clearly the effect of nonpayment of premium, no further notice necessary 7

Material Misrepresentation Material is the key word Policyholder knew representation was false and either You relied on misrepresentation and it is either material or made with intent to deceive, or; Fact misrepresented contributes to the loss 8

Substantial Breaches Failure of a condition or breach of a warranty doesn t effect company s contractual obligations unless: Exists at the time of loss and either: Increases the risk Contributes to the loss 9

Substantial Change in Risk Couldn t have: Reasonably foreseen the change Contemplated the risk 10

Foreclosures Vacant Unoccupied Can you mid-term cancel due to: Impending foreclosure? Bank owned? Foreclosed but still occupied? Direct knowledge that vacant and/or unoccupied? When notified by neighbor, agent, or mortgage company that property is vacant and/or unoccupied? 11

Questions on Cancellations If in doubt about what action to take and whether it s in compliance, call OCI. We are willing to assist when possible. Complaints & Central Services (800) 236-8517 Rhonda Peterson (608) 267-7186 rhonda.peterson@wisconsin.gov 12

Agent Licensing Changes 2007 Wisconsin Act 169 Effective April 9, 2008 Continuous Renewal Last Day of Birth Month Failure comply with Continuing Education or Pay Fees Suspension Period Eliminated Automatic Termination Changes in process used for reinstatements 13

Agent Licensing Changes Pending Changes to Ins 6, 26 and 28 Designed to Modify Existing Rules to Conform with NAIC Model Requirements (National Uniformity) Notable Changes Fingerprint Requirement New Agents Expands Prelicensing Education Requirement to Allow for Online/Self-Study Courses Adds Additional Limited Lines of Authority Crop Change in Fees 14

Questions on Agent Licensing Laurna Landphier (608) 267-1238 laurna.landphier@wisconsin.gov 15

Financial Examinations Common Recommendations Policies and Losses Regulatory Documentation Investment Management 16

Policies and Losses Accuracy in premium accounting Document claims comprehensively and settle promptly Claims & Loss Reserves, & Reinsurance Manage underwriting properly Periodic inspections Signed undertakings 17

Regulatory Documentation Maintenance of Corporate Records Biographical sketches file with OCI Complete board and committee minutes Conflict of interest statements File escheat reports in a timely manner Business Plan tracking and updates Disaster recovery plan and EDP mgmt Properly report largest probable maximum loss on a single risk 18

Investment Management Develop a formal investment plan Proper controls over cash and checks Follow state regulations concerning custody of securities and investment advisors Comply with investment limitations and type reporting. 19

Financial Reporting Questions Peter Medley (608) 267-5030 peter.medley@wisconsin.gov Steve Junior (608) 267-4388 steve.junior@wisconsin.gov 20

Recently Introduced Bills Assembly Bill 24 Property Insurance Assembly Bill 185 Property Insurance Automobile Insurance Assembly Bill 121/Senate Bill 118 Automobile Insurance Assembly Bill 75 Budget Bill 21

AB 24 Applies to Property Insurance Policies Insurer must pay for any cosmetic modifications to undamaged portions of the property that are necessary to match the repaired, rebuilt, or replaced portion of the property that was damaged. In other words, items such as: Painting Siding 22

AB 185 Applies to: Motor vehicle insurance Property insurance, including renter s and homeowner s insurance Prohibits an insurer from considering or using information in an individual s credit report: For purposes of issuing or renewing a policy or setting policy premiums In rating plans as a rating factor 23

AB 121/SB 118 Applies to motor vehicle insurance Prohibits requiring a certain repair facility for repairing a motor vehicle Requires insurer to tell the insured or third party that: They may select any repair facility for a damage repair estimate or the repair The insurer will cover all reasonable and necessary costs of the repair regardless of which repair facility they select Requires insurer to ask if a repair facility has been selected and, if not, may then provide a referral 24

AB 121/SB 118 (Continued) Requires all insurance cards to state that insurers cannot require repairs to be made at a particular repair shop Requires insurers to pay for repairs at the same rate that the general public pays in that local market area Unless the insurer and repair facility have an agreement otherwise Prohibits insures from limiting the amount paid on the basis that the repair would have cost less if it had been made at a repair facility specified by the insurer. 25

AB 121/SB 118 (Continued) Prohibits an insurance adjuster from preparing a vehicle damage estimate or from altering one prepared by another party without first physically inspecting the damage to the vehicle Prohibits unilaterally and arbitrarily disregarding a repair operation or cost identified under a damage repair estimate system Requires auto body repair facilities and auto insurance claim facilities post a conspicuous notice and include in its estimates stating that insurers are prohibited from requiring that repairs be made by a particular repair facility 26

AB 75 - Budget Bill Auto Insurance Insurance Claim Intercept Joint & Several Liability 27

AB 75 - Budget Bill (Continued) Auto Insurance Proof of financial responsibility Current Minimum Limits 25/50/10 Proposed Minimum Limits 100/300/25 Uninsured Motorist (exempts town mutuals) Current Minimum Limits 25/50 Proposed Minimum Limits 100/300 Medical payments Current Minimum Limits at least 1,000 Proposed Minimum Limits at least 10,000 28

AB 75 - Budget Bill (Continued) Auto Insurance Underinsured Motorist Currently Optional Minimum limits of 50/100 Proposed Required Minimum limits of 100/300 Change in definition 29

AB 75 - Budget Bill (Continued) Auto Insurance Umbrella/Excess Liability, that provides auto liability coverage Currently Optional Uninsured & Underinsured Motorist Coverage Proposed Requires offer of Uninsured & Underinsured Motorist Coverage If not offered, policy reformed to include coverages 30

AB 75 - Budget Bill (Continued) Auto Insurance Uninsured Motorist Coverage Currently Requires contact between two vehicles Proposed Contact not required 31

AB 75 - Budget Bill (Continued) Auto Insurance Currently Following Provisions Allowed: Non-stacking of limits for: Liability Medical Payments Uninsured (UM) & Underinsured Motorist (UIM) Reduction of UM & UIM limits by payments under worker s compensation & any disability benefits laws Vehicle not described in the policy not covered Proposed None of the Above Provisions Allowed 32

AB 75 - Budget Bill (Continued) Insurance Claim Intercept Before paying an insurance claim of $500 or more, must check for: A medical assistance liability A support liability If one or more exist, then payment: 1st to Dept. of Children and Families 2nd to Dept. of Health Services If any money remaining, to the person 33

AB 75 - Budget Bill (Continued) Insurance Claim Intercept Types of insurance payments subject to the law Auto Casualty Liability Malpractice Worker s Compensation Types of insurance payments not subject to the law Life Property/homeowners Long-term care Health 34

AB 75 - Budget Bill (Continued) Recovery Actions in Negligence Cases Several liability Currently a person can be held liable for his/her percentage of negligence assigned Joint & several liability Proposed a person can be held liable for 100% if other negligent person or persons cannot pay 35

AB 75 - Budget Bill (Example) Recovery Actions in Negligence Cases Scenario: Party A - 20% negligent Party B - 80% negligent unable to pay Party C - Injured third party Current: Party A responsible for 20% of injuries Party B responsible for 80% of injuries Proposed: Party A responsible for 100% of injuries 36

Questions Jo A. LeDuc, CIE, MCM, CPCU Deputy Director Bureau of Market Regulation Office of the Commissioner of Insurance State of Wisconsin jo.leduc@wisconsin.gov (608) 267-9708 On the Web at: oci.wi.gov 37