Back Compliance Awareness

Insurance Commissiones [e.g. NY's now Govenor Spitzer] are raising the bar on compliance with all the laws and regulations applicable to the insurance industry. Companies are now paying more attention to regulatory compliance. Would it be helpful to agencies to have an e-mail service that raised awareness of agents and staff of compliance issues? This could be accomplished through regular, and sometimes special, e-mail bulletins or discussion pieces presenting timely information about what is needed to comply? Particularly for agents binding or issuing policies or with claim authority, is staff compliance awareness a skill worth paying a modest fee to achieve?

As is usual with things about Regulatory Compliance, interest is lacking at most every level. "It is all done in the computer." Well, it isn't. People need to be aware of what is required, and they often are not. Did yo know that in Connecticut, you can settle some kinds of claims too fast? Many don't. That is why a regular reminder, interesting and timely, would keep regulatory compliance somewhat more readily available in the minds and habits of those doing business as agents and brokers.

While it is easy to ignore the need to comply with laws and regulations, it is not good business. State market conduct examinations find violations for agents as well as insurers. The result can be substantial fines and penalties. In a recent exam, one agent was required to reissue, at a lower premium, a full thre years of policies. Taking steps to prevent such actions that cost both money and reputation is sensible. A regular e-mail reminder to agency and brokerage producers, raters, policy issuers, claims settlers, as well as insurer personnel would seem to be a worthwhile investment. Your thoughts would be beneficial.

I had a conversation with a key executive at an insurance industry services company yesterday. They develop rates, rules, and forms for members. While they have what they call a "Compliance" unit, it is only involved in making filings with state insurance departments. They provide no guidance to members or their agents about how to comply with state laws and regulations. They do agree that most underwriters and agents don't have the need to comply high in their thought processes. Agents and underwriters, he said, worry about price, acceptability, commission, and the like, but not compliance. There is a general outlook that compliance is all taken care of by the computer. It is not. A service that could help producers, underwriters, and adjusters consider what is needed to comply, to know where to look to learn what is needed, and to know the penalties for not complying would seem to have value. Yet, even here where issues are presented, there seems little recognition of this. Comments?

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We rely upon several areas for trying to keep up with compliance issues. If you are a member of the CIAB (Council of Agents & Brokers, www.ciab.com) they have a service that is outstanding but you have to be a member to purchase this service (I believe). Keeps us updated with the monthly changes state by state and has a summary of licensing issues and insurance laws that change. They also have a report by state concerning bills that have been introduced/passed/killed (Great stuff). We are signed up with every state we are licensed in for their electronic newsletters and e-mail alerts (not every state has them). Bottom line however, when you procure a license in most states, when you sign the license application you are testifying that you are aware of the states insurance laws and will keep up to date with them!! The pressure is all on the licensee. We also look at each of the Big I state association websites for states that we are licensed in (once every two months) to see if they post any news about changes in insurance laws and if so, we call them and request further information. (If they say we have to be a member of that association, we just call our state association and ask them to obtain the data for us, has worked every time for us thus far) If there are issues with or questions about company compliance and or claims issues, we contact our state association and ask what they know about a certain issue. They are an excellent resource for us and I am sure other agencies in our state (IL)

While there are places that post laws and regulations, how do you get producers or agency claims adjusters to go look for it? Mostly, they work on the basis of "How we've always done it" or "This is what Sam [or Roger or Pete] taught me was right." A nominally priced service that would bring the need to research new and unique laws and regulations to the regular attention of business staff would seem to be useful. This especailly for MGA's, underwriting agencies, and thos with claim authority. Your thoughts?

Compliance Awareness. Something that apparently does not receive a lot of attention. Yet, insurers pay millions of dollars each year in market conduct fines and penalties because their underwriters, claims adjusters, and agents don't meet the state's requirements. For example, an agent placed several 24 hour food shops in a discounted company and several similar shops in a full priced company although the shops were all the same. The state examiner fined the insurer [which controlled both companies] because they did not treat all similar risk the same. In addition, the full priced policies had to be rewritten at the discounted price. Why did the agent feel it could treat these risks differenntly? It was a matter of marketing taken unawarre of the violation of regulations. Compliance awareness is a saver, preventing instead of having to correct. Contact icanalert@comcast.net if you are interested in subscribing to a service that would send a compliance alert to your staff on a regular basis.

Compliance does not matter? An insurance agency must pay $5.8 million to a small business that discovered it lacked workers' compensation coverage after a burned employee sued. An agent for improperly failed to tell the company that it wasn't covered, a Los Angeles County Superior Court judge found. On July 2, he ruled in favor of owners the business. The company lines pickup trucks with plastic. The suit by the owners said they only learned about their lack of coverage after a jury in 2004 found against them in a personal injury suit. They were ordered to pay $5.6 million to an employee who suffered second- and third-degree burns in an explosion. Another insurer paid $1 million but the remainder, including interest, totaled $5.8 million. The company claimed their agent told the owners they should get workers compensation insurance and they didn't want it, "but there was never anything in writing to indicate that," said the attorney for the owners.

I just saw a great advertisement about NILS, a compliance information system. NILS and similar databases have lots of information to tell agents and underwriters and claims adjusters what they should and should not do. However, none of that information is helpful if no one goes to look for it. One has to think about compliance issues and the need to comply to bring to mind the existance of a compliance information database. That is where the ICAN - Insurance Compliance Awareness Network - could help. By providing regular Compliance Alerts and Discussions, it can keep the need to comply in the minds of those doing the business of property/casualty insurance. Then, the database has value because someone actually thinks to use it. Then, fines are eliminated or reduced, licenses are not rescinded, and policyholders as well as regulators are happy. What are your thoughts about such help in assisting insurers to comply?