Hot Topics and MCE Trends 2011 Todays Hot

Hot Topics and MCE Trends - 2011

Today’s Hot Topics & Enforcement Trends A look back at 2010 • Its “hot topics” • Its enforcement issues What does 2011 present to us? 2

Background • Consumer Protection focus - states • Financial Services Reform • Health Care Reform 3

Property & Casualty: 2010 -2011 4

States’ Focus - 2010 • • • Disclosures Auto Claims Anti-Fraud Credit Scoring Certificates of Insurance 5

Claims Release Disclosure New Hampshire • WARNING "IF YOU SIGN THIS RELEASE YOU MAY FORFEIT YOUR RIGHT TO UNINSURED MOTORIST INSURANCE BENEFITS FROM YOUR OWN AUTOMOBILE INSURANCE POLICY. CONSULT WITH YOUR INSURANCE AGENT, YOUR AUTOMOBILE INSURANCE COMPANY, OR YOUR ATTORNEY BEFORE SIGNING. " • I certify that I have read the above warning and fully understand it. Effective January 1, 2010 6

Policy Limits Disclosure New Hampshire • Disclosure to the claimant, or his or her counsel, the policy limits of the policy or policies of all liability insurance applicable to the defendant as to such claim. Effective January 1, 2010 7

WC Medical Records Disclosure New Hampshire • Request for medical records must contain this notice in: 1. bold print 2. font size at least 2 points larger than that used in the request: • "This request is strictly limited to medical information relevant to the occupational injury or illness that underlies the patient's workers' compensation claim, including any past history of complaints of, or treatment of, a condition similar to that presented in the claim. " Effective July 1, 2010 8

Workers’ Comp Disclosures Oregon • Following the death of a worker all future notices are required to be addressed to the workers’ estate or qualified beneficiary • New notification requirement for workers with multiple jobs at the time of injury • Notifications of acceptance and denial of claims must advise the worker of the two-year time limitation to request reimbursement Effective January 1, 2010 9

UM/UIM Disclosure Utah • UM/UIM insurance companies must provide a written response to a covered person’s demand for uninsured or underinsured motorist compensation within 60 days • Additional procedures for litigating or arbitrating a demand for UM/UIM Effective March 30, 2010 10

Total Losses Oregon • Provide any valuation or appraisal reports relied upon by the insurer to determine value of total loss • DOI developed disclosure form that includes information about the total loss, vehicle valuation, and the duties of the insurer, how and when the insured may contact the Division Effective January 1, 2010 11

Total Losses Louisiana • Policy provides for the adjustment and settlement of vehicle total losses for ACV or replacement with like kind and quality • The insurance company chooses a cash settlement based on the actual cost to purchase a comparable motor vehicle • Costs must be derived by using either a fair market value survey conducted using qualified dealers in the local market area, or, if there are no dealers in the local market area, the nearest reasonable market can be used Effective August 15, 2010 12

Total Losses Connecticut • Retail value of a total loss vehicle may be determined from any publicly available automobile industry source approved by the DOI • Insurers must provide written notice including the insurance company's calculation of the vehicle's total loss, a valuation report and a notice to dispute the claims settlement Effective January 1, 2011 13

Fraud Initiatives - 2010 • Arizona: Makes it a crime for an auto glass repair shop to bill an insurer for misrepresentations on a repair of an automobile • California: DOI meetings with insurers to discuss insurance fraud; immunity for meeting discussions of specific suspected, anticipated, or completed acts of insurance fraud – ALL LINES • Louisiana: Requirement to submit fraud plans to DOI – ALL LINES 14

Fraud Initiatives - 2010 (All Lines) Louisiana (January 1, 2011) Anti-fraud plan • Must be filed with the commissioner • Must outline specific procedures, actions, and safeguards • Must include how the authorized insurer will: 1. Detect, investigate, and prevent all forms of insurance fraud , 2. Educate appropriate employees on fraud detection and the insurer's or health maintenance organization's anti-fraud plan. 3. Provide for fraud investigations 4. Report a suspected fraudulent insurance act to the DOI and others 5. Pursue restitution for financial loss caused by insurance fraud 15

Fraud Initiatives - 2010 (All Lines) Rhode Island • All insurance companies must have anti-fraud initiatives in place for detection, reporting, preventing fraud • May include: 1. Fraud investigators, who may be insurer employees or independent contractors; or 2. An antifraud plan Effective January 1, 2011 16

Credit Scoring – ELC Activity • • • Connecticut Indiana Iowa Kansas New Hampshire 17

Credit Scoring - ELC Connecticut • Insurers must disclose to each applicant that the credit history maybe used in the underwriting or rating of applicant’s policy, and • That the applicant has the right to request, in writing, that the insurer consider an extraordinary life circumstance which occurred within 3 years before the date of the application • Insurer must provide at policy issuance a written disclosure that includes: 1. Insurer name, address, telephone number and toll-free telephone number 2. Details about how credit information is used to underwrite or rate 3. Summary of consumer protections regarding the use of credit Effective July 1, 2011 18

Credit Scoring - ELC Iowa/Kansas/New Hampshire • Written request from a consumer • Insurer shall provide reasonable exceptions to the insurer's rates, rating classifications, company or tier placement, or underwriting rules or guidelines for a consumer who has experienced and whose credit information has been directly influenced by extraordinary life circumstances Effective July 1, 2010 19

Credit Scoring - 2010 Connecticut: • Adverse action cannot be based solely on information contained in an insured's or applicant's: 1. credit history 2. credit rating, or 3. lack of credit history Effective January 1, 2011 20

Credit Scoring - 2010 New Hampshire: • Insurers prohibited from cancelling, nonrenewing, or declining automobile or homeowners policies solely on the basis of credit information obtained from a credit rating, a credit history, or a credit scoring model, without consideration of any other applicable and permitted underwriting factors independent of credit information Effective January 1, 2011 21

Certificates of Insurance - 2010 • Arkansas, Connecticut, Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, Texas and Utah issued bulletins in 2010 • Essentially serving as reminders about not issuing or using a Certificate of Insurance form that contains language that conflicts with or purports to alter any policy coverage, exclusion, provision or condition 22

Certificates of Insurance - 2010 Texas – Evidence of Commercial Property Insurance • • • Forms are sometimes issued as “a matter of information only” or similar language without the contemporaneous issuance of a binding document or policy of insurance Insurers or agents should not use any form or make attestations that do not accurately reflect what actually exists for the benefit of the policyholder or beneficiary, whether the form or attestation references a binder, policy, or action to be taken by the insurer with regard to issuing a binder or policy Insurers or agents should not issue or sign forms that create rights and obligations outside the insurance contract 23

Certificates of Insurance - 2011 • • Arizona’s Bulletin 2011 -01: outlines the requirements that certificates must clearly and accurately state the insurance coverage provided and may not obscure or misrepresent the coverage or terms of a policy, the Bulletin also addresses producers’ responsibilities and possible enforcement actions. Georgia’s Directive 11 -EX-2 serves as a reminder that every certificate of insurance, except automobile liability insurance cards, is to include the following statement, or a substantially similar one, printed conspicuously and in no smaller than 10 point font, boldfaced type: “This document is issued as a matter of information only and confers no rights upon the document holder. This document does not amend, extend, or alter the coverage, terms, exclusions, conditions, or other provisions afforded by the policies referenced herein. ” 24

Credit Scoring – 2011 • • • Rhode Island: Regulation 116 establishes guidelines regarding the use of insurance scores in underwriting and rating of homeowners and/or private passenger automobile insurance when a consumer experiences an extraordinary life event. Adopted Maine HP 294: An insurer that obtains credit information on a consumer shall provide the consumer with notice of the consumer’s credit score and identify the impact of that score on rates and coverage as part of the policy issued to the consumer. Pending Mississippi’s SB 2674: prohibit an insurer from requiring a particular payment plan for an insured under a private passenger or homeowner's insurance policy based on the insured’s credit history, as well as from using credit information in determining rating or eligibility for coverage. Pending Montana HB 29 and SB 137: extraordinary life circumstances in personal lines underwriting and the use of credit information in automobile insurance rating and coverage eligibility, respectively. Pending Ohio’s HB 615: prohibitions on insurers’ use of a credit score, credit history, or credit report in rating or underwriting. Pending 25

Credit Scoring – 2011 • • 1. 2. 3. Pennsylvania’s SB 126: prohibit an insurer from denying, canceling or refusing to renew personal insurance due in whole or in part to an insured's credit history. Pending South Carolina HB 3101 and SB 85: prohibitions on the use of credit reports in rating and underwriting. Pending Texas’ HB 194: prohibit an insurer from rating a risk based wholly or partly on the credit information, credit report, or credit score. Pending West Virginia: Pending HB 2049 seeks to prohibit the use of a person's credit history in insurance transactions HB 2319 would prohibit the use of credit scores in casualty rate filings HB 2467 would not only prohibit the use of credit scoring as a rating factor in homeowners or automobile liability policies, but also prohibit declinations of automobile insurance if based, in any part, upon the number of inquiries reflected in a credit report, credit score report or CLUE report or upon any information contained in any of these reports, if the accuracy is disputed by the applicant. 26

Consumer Protection – 2011 - Pending • Connecticut’s SB 168: would prohibit property and casualty insurers from assessing late fees on policyholders who make late premium payments. • New Jersey’s AB 3509 and SB 2432 both seek a requirement for insurers to allow payment of homeowners' insurance premiums in monthly installments. 27

Consumer Protection – 2011 - Pending Maryland: SB 136 • Homeowner's insurers to provide to an applicant or insured, at the time of application or renewal, a written notice that states whether the insurer's standard homeowner's insurance policy provides coverage for loss that: 1. is caused by or results from a discharge of water from a plumbing system or plumbing source, including a discharge from a water main break, whether the plumbing system or plumbing source is located on or off the insured premises; and 2. is not caused by the negligence of the insured. 28

Mississippi - Pending • HB 1199: insurer to provide a clear written disclosure of the actual costs of each item of coverage contained in the renewal policy. The disclosure shall express the costs as the actual rate or cost per $1, 000 of coverage of each item of coverage, and as the actual total cost of each item of coverage. • HB 1240: liability insurer shall disclose the limits of any policy to a third-party claimant 29

Life & Annuities: 2010 -2011 30

Life & Annuities • • Suitability Retained Asset Accounts STOLI/STOA Annuity Disclosures 31

Suitability Model Law Changes • Adopted at NAIC Spring Meeting in Denver • Insurer is responsible for compliance with the model’s requirements, even if insurer contracts with 3 rd party • Insurer to review all annuity transactions • Establishes both general and product-specific training requirements for producers • States can, of course, exceed model’s new requirements 32

Suitability Model Scope • Carrier review of all fixed-annuity transactions • Greater supervisory responsibility on insurance companies which need to: 1. Determine the suitability of agents' annuity recommendations 2. Document non-recommended transactions 3. Provide annuity and suitability training • Carriers are requesting more information on their applications and adding more screening to assess suitability 33

Supervision System – Procedures & Training It’s all about compliance: • Reasonable procedures to inform insurance producers • Incorporate Model’s requirements into producer training manuals • Establish standards for insurance producer product specific training (PST) • Maintain reasonable procedures to require producers to comply with the CE and training requirements • Product specific training and training materials which explain all material features of its annuity products to producers 34

2010 Activity - Suitability Iowa • Provides standards and procedures for recommendations to consumers involving annuity products • Brings the rules into accord with a new NAIC model regulation. • Requires insurers to establish a system to supervise recommendations, as well as to set forth standards and procedures for recommendations to consumers that result in transactions involving annuity products Effective January 1, 2011 35

2010 Activity - Suitability • Newly adopting jurisdictions, the District of Columbia and New York, essentially follow the Model, with an effective date of Dec. 24, 2010 for the District of Columbia. New York actually promulgated an “Emergency Regulation No. 187” with an initial timeframe of Dec. 29, 2010 to Mar. 26, 2011. 36

2010 Activity - Suitability Arkansas • Rule 50 Annuity suitability training course approval form effective 9/30/10 Oklahoma • New training requirement: one-time four hour annuity course • Insurers must ensure producers are able to verify completion of the required training • Verification of training lies with insurer • Producers are ultimately responsible to complete the training in accordance 37

Recent Activity - Suitability • Colorado, Rhode Island Ohio adopted similar changes to their rules and regulations, with recent final adoptions resulting in effective dates of April 1, June 1, and July 1 2011, respectively. • Oregon has also adopted additional regulatory requirements generally consistent with the Model with a primary effective date of July 1, 2011. 38

Retained Asset Accounts Activity - 2010 • • • Maryland Delaware Kentucky Montana New Jersey New Hampshire 39

Retained Asset Accounts Activity - 2011 • • • Maryland - pending Iowa New York – pending Connecticut Maine New Jersey Ohio Virginia – pending Indiana - pending 40

STOLI/Life Settlements - 2010 New Hampshire’s HB 660 1. 5 year period (exceptions apply) 2. Requires insurers to respond to a request for verification of coverage within 30 calendar days 3. Requires insurers to indicate intention to pursue an investigation regarding contract or fraud 4. Prohibits the use of life settlement contract forms or disclosure statement forms unless first filed with and approved by the DOI 41

STOLI/Life Settlements - 2010 • Wisconsin’s SB 513 1. 5 year waiting period before new life insurance policies can be sold (exceptions apply) 2. Seen as step in STOLI prevention 3. OIC to adopt rules including a disclosure requirement 42

STOA - 2010 New Jersey Bulletin 10 -14 • Ask applicants and/or producers “targeted” questions 1. purpose of the purchase 2. relationship between agent/broker and annuitant 3. health status of the annuitant 4. source of funds for premium payments 5. whether an insurable interest exists between the owner of the annuity and the annuitant • Closely monitor contract deposits • Follow up with calls to annuitants and contract owners; • Redesign variable annuity contracts, e. g. , no guaranteed minimum death benefit (GMDB) during the first two years, bolster the contestability clause • Report suspected transactions to Office of Consumer Protection Services 43

Annuity Disclosures - 2010 Idaho • Applicant, at or before the time of application, must be given both the disclosure document and the buyer’s guide in the form prescribed by the director • Disclosure document shall be dated and signed by the prospective annuity owner and producer and the company shall maintain a signed copy for the life of the contract. If the application for an annuity contract is taken by means other than face-to-face, applicant shall be sent both the • Disclosure document and the buyer’s guide no later than 5 business days after the completed application is received by the insurer 44

Health: 2010 - 2011 45

Health • • Health rates oversight Discretionary Clauses Mandated Benefits All that is “PPACA” 46

Health Rate Oversight • Connecticut HB 5079: Proposes requirement that the Department hold a public hearing for proposed health insurance rate increases - Pending • Washington HB 1220/SB 5120 -Pending • California OAL approved request for an emergency regulation providing DOI authority to enforce the 80% Medical Loss Ratio (MLR) 47

Discretionary Clauses - 2010 • New York: Proposed prohibiting insurance carriers from inserting discretionary clauses in insurance policies, including LTD policies • Texas: issued bulletin requesting that filings not include these 48

Discretionary Clauses - 2011 Texas • Order and newly adopted rules prohibit discretionary clauses (2010) • Effective February 1, 2011 for disability income insurance • June 1, 2011 for other health, life, and disability policies • Past claims will not be affected 49

Discretionary Clauses District of Columbia • • • DOI will examine policies which have these clauses to determine if any discretionary clause can be used improperly to deny claims or to restrict any rights an insured has under the policy, including but not limited to: 1) the right to appeal to the insurer or health care center under contract terms; 2) the right to an external appeal for certain managed care determinations as specified in District of Columbia Statutes; and 3) the right to proceed to litigation against the insurer or health care center. DOI does prohibit Sole Discretionary language and other types of Discretionary Clauses in policy forms, and will request changes to the policy form. All lines of insurance will be monitored for such practice and usage of Discretionary language or clauses. Use of such language could cause delay or rejection in the form filing process. November 24, 2010 50

Mandated Benefits Virginia • Effective July 1, 2010 group health insurance coverage issued to a large employer must provide coverage for mental health and substance abuse services • The Bureau will require certain information to expedite and facilitate the review and approval of forms Administrative Letter 2010 -4 51

Mandated Benefits Illinois • All individual and group health insurance policies and HMO contracts must provide coverage for the diagnosis and treatment of autism for children under 21 • Increase in the maximum autism benefit from $36, 000 to $37, 260 takes effect on January 1 st • Applies to policies and HMO contracts that are issued, renewed, or modified on or after January 1 of each year • Benefits provided under the autism mandate are in addition to benefits required by the Illinois Serious Mental Illness Mandate 52

Mandated Benefits – Autism - Pending • • Connecticut SB 672 Iowa SF 64 Michigan SB 38 Mississippi SB 2757 New York AB 413 Texas SB 441 Washington SB 5059 53

Trade Practices Oklahoma • No health benefit plan can deny a claim on the basis of the insured's status as a victim of domestic violence and that domestic abuse must not be considered to be a preexisting condition • The acts constituting the domestic abuse must be reported to a law enforcement agency Effective November 1, 2010 54

Standardized Health Application Illinois 50 Ill. Adm. Code 2030 • Creates standardized health insurance applications for use by carriers offering health benefit plans in the individual and small group markets. • Carriers may not refuse to accept or to discriminate in the processing of these standard health applications. for a minimum of 60 days from the date of the earliest signature. For the period of time that the information contained within such application is current (minimum of 60 days) Effective January 21, 2011 55

Market Conduct: Continuing Trends & Challenges

Property & Casualty: Market Conduct 57

Timely Claim Handling • In 20 instances, the Companies failed to conduct and pursue a thorough, fair and objective investigation of a claim and persisted in seeking information not reasonably required for or material to the resolution of a claim dispute • In 12 instances, the Companies failed to conduct and pursue a thorough, fair and objective investigation • In 8 instances the Companies persisted in seeking information not reasonably required or material to the resolution of a claim dispute. • The Companies did not take into consideration hand written notes and previously submitted information confirming medical bills were incurred • The Companies sent repeated Documentation Requests for information which was either in the claim file or not reasonably required CA 5/10 58

Timely Claim Handling • In 29 instances, the Company failed to supply the claimant with a copy of the estimate upon which the settlement was based. The Company failed to document that a copy of the estimate is provided to the insured. • In 17 instances, the Company failed to document the basis of betterment, depreciation, or salvage. The basis for any adjustment shall be fully explained to the claimant in writing. The Company failed to tender the total loss offer in writing. • In six instances, the Company failed to provide written notice of any statute of limitation or other time period requirement not less than 60 days prior to the expiration date. CA 10/10 59

Workers’ Compensation Claims • Failed to comply with TDI-DWC or Commissioner Order; Failed to timely pay income benefits to injured employee; Failed to timely act on request for reconsideration of a medical bill; Failed to accurately report benefit data to TDI-DWC or accurately submit benefit data by electronic data interchange • Failed to sufficiently explain the reasons for the reduction or denial of payment for health care services to the injured employee; Failed to pay for preauthorized medical services; Failed to timely pay attorney fees TX 1/11 60

Documentation • Company failed to maintain all documents, notes and work papers in the claim file. • In one instance there was nothing in the file documenting the reason that the claim was closed without payment. • In one instance the dates of inspection and appraisal were not documented in the claim file. • In the third instance cited there were no activity log notes, correspondence or other working papers in the file documenting the details of pertinent events that took place on the file from the date the claim was received until the date the claim was closed. CA 4/10 61

Underwriting • • Notice of nonrenewal does not consistently state the specific reason for termination, and rather contains language instructing insureds to write to {Company} for an explanation of the adverse underwriting decision. This issue may potentially affect any {Company} PPA {Private Passenger Automobile} insurance policyholder about whom an adverse underwriting decision is made which results in the nonrenewal of the policy. This issue was identified in the 1998 exam in the PPA and CMP lines of business. The issue was raised again in 2002 in the exam of the HO line of business. This practice was noted in the current examination as affecting the PPA and HO lines of business. CA 4/10 62

Underwriting • . . . It was determined in a sample of twenty (20) policies that the company cancelled seventeen (17) policies for nonpayment of the first premium on a new policy without giving the required fifteen (15) day notice, in violation of Connecticut General Statutes, Section 38 a 343(A). CT 3/10 • failed to indicate on the notice the amount owed by the insured. NY 11/10 63

Disclosures • The company failed to obtain a signed written rejection of UM limits equal to the liability limits on the policy • The companies' long form Notice of Financial Information Collection and Disclosure Practices did not contain all of the information required by this statute VA 5/10 64

Rating • Use of rates that were not in accordance with the Companies’ rate filings then in effect, failure to document their applications of their filed schedule rating plan, and failure to document their applications of their filed commercial rating schedule and failure to provide the reasons for applying schedule rating debits or credits. WA 11/10 65

Recent P&C Fines • Connecticut 1. $397, 000 – December 2010 2. $101, 000 – January 2011 • • Missouri - $200, 000 – February 2010 New York - $475, 000 – January 2010 Texas - $221, 000 – September 2010 Washington - $534, 000 – November 2010 66

Life & Annuities: Market Conduct 67

Suitability • …failed to adequately supervise its field management and insurance agents to prevent certain of its Respondent’s Wisconsin sales branch offices and insurance agents from engaging in: 1. unsuitable annuity sales and replacements, improper annuity marketing and sales practices, including initiating annuity sales solicitations without disclosure that annuities were being sold 2. violations of do-not-call list restrictions for the purpose of annuity sales solicitations 3. misrepresentations relating to annuity sales, and failing, through the actions of its managers and agents, to cooperate with OCI WI 7/10 ($1, 500, 000) 68

Replacement – New York • • • New York: Replacement and application processes. 2/10 ($1, 900, 000) Did not present complete, accurate and/or timely Disclosure Statements to applicants as required under Section 51. 5(c) of Regulation 60. Did not adequately process and resolve client complaints pertaining to the sale of life insurance policies or annuity contracts as follows … (ii) Respondents did not, in certain instances, provide their clients with detailed reasons in writing for the denial of complaints. Did not adequately process and resolve client complaints pertaining to the sale of life insurance policies or annuity contracts as follows … (iii) Respondents, in certain instances, permitted individuals whose responsibilities included overseeing agents and approving sales transactions to review and determine whether to deny or settle complaints with respect to policies in which the reviewer had a financial interest in the outcome of the complaint, thereby potentially compromising the fairness and impartiality of the complaint handling process. 12/10 ($2, 000) 69

Replacement • The Company failed to provide clear notification to the owners of newly issued replacement life insurance policies and annuity contract of the right to return the policy or contract within 30 days after the delivery MD 9/10 70

Advertising • The examiners identified eight pieces of advertising for the {annuity} product where the riders are advertised as a benefit of the contract; however, there is no clarification provided to the agent or the insured explaining that the riders are only available to policyowners age 75 and under at the time of purchase • The advertisement for the {annuity} highlights that “after 12 months the client can cash out all or part of his money. ” There is no clarification on the advertisement to explain that if a cash-out over the penalty-free withdrawal amount takes place in the first 14 years, the withdrawal will be subject to surrender or commutation charges CA 4/10 71

Unfair Trade Practices • Sold insurance policies to active duty services members of the United States Armed Forces in violation of Insurance §§ 700, 780, and 790 • Contained a side fund as defined by Military Sales Regulation § 2695. 24(n) and alleged that the side fund did not comply with Military Sales Regulation CA 12/10 ($275, 000) 72

Health: Market Conduct 73

Claims • Failure to quickly inform consumers about appeals decisions, the reason for such decisions or consumers' rights for further appeals • Failure to pay interest on past-due claims • Insurer to correct violations involving health-care appeals, claims handling and health-care provider grievances AZ 2/10 74

Claims • Failure to provide documentation or maintain adequate records • Failure to follow complaint handling procedures • Failure to timely acknowledge or act promptly upon communication with respect to claims • Anti-Fraud plan failed to include a description of the insurer’s plan for anti-fraud education and training of its claim adjusters or other personnel • Anti-Fraud plan failed to acknowledge that the insurer or Special Investigation Unit shall report all suspected fraudulent insurance acts directly to the Division of Insurance Fraud electronically using a digital reporting interface FL 6/10 75

Claims -Denials • Unreasonably denying claims for acupuncture treatment and denying acupuncture claims for certain conditions without reliable supporting information or evidence demonstrating that such treatment is not cost-effective or clinically effective for such conditions. WA 2/11 76

Claims • The HMO failed to notify primary care providers of the termination of specialty referral services provider • The HMO failed to notify the provider 90 days prior to termination if unrelated to fraud, loss of licensures, or abuse • The HMO failed to reimburse Health Care Practitioners the proper negotiated rate. • The HMO failed to complete and maintain a mental health expense ratio form developed by the commissioner, and failed to make copies of the form publicly available to an individual, enrollee or member upon request. • The HMO failed to use a private review agent that held a certificate of registration granted by the Commissioner at the time of utilization review. • The HMO failed to include an expedited procedure for use in an emergency case for purposes of rendering a grievance decision within 24 hours of the date a grievance is filled with a carrier. MD 10/10 77

Documentation • the examiners noted delays in receiving responses to examination handbook interrogatories. In addition, the examiners found that initial information was often inadequate or incomplete and necessitated additional information requests to obtain the documentation required to perform a complete review. The Company also requested time extensions when responding to those follow-up requests DE 11/10 78

Recent Health Insurer Fines • • New York: Compliance issues associated with the administration of the Healthy NY program - $750, 000 California (DMHC): Failure to properly pay medical claims – 7 insurers - insurers required to provide restitution to health care providers whose claims were underpaid or incorrectly rejected $5, 000 Texas: Failure to pay clean claims in a timely manner and to provide certain mandated coverages to insureds - $500, 000 Connecticut: Failure to properly license and/or appoint agents; failure to pay claims within 45 days; failure to pay claims without conducting a reasonable investigation; failure to play claims as required by mandated benefits in Connecticut; insufficient documentation for regulators to review - $395, 000 79

What’s Up for the rest of 2011? Legislative & Regulatory Initiatives = Continued focus on consumer protection • • Disclosures for the consumer Fraud Prevention & Detection Credit information use Suitability Senior protection Control over health insurance rates Discretionary clauses Market conduct focus • Timely claim handling • Disclosures 80

Examiners Checklists? 81

Examiners Checklist for P&C? • Timely claim handling • Cancellation/Nonrenewal timeframes/required notices 82

Examiners Checklist for L&A? As states “roll-out” Model 275… • Evidence of product specific training (agents cannot sell unless PST is done) • Evidence of supervision • Evidence of transactional (the secondary) review • How are “they” selling your products • Evidence of that “reasonable basis” Replacements? Are requirements met? 83

Examiners Checklist for Health? • • Timely claim handling Policy forms (do they conform to PPACA? ) Disclosures Rates (are insurers using approved rates? ) 84

Questions