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Property and Casualty Advisory Council

Insurance Regulation Law Update William J. Toman

Council Chair John Duwell of West Bend Mutual introduced staff in new positions at the Wisconsin Office of the Commissioner of Insurance ("OCI"):

  • Gina Frank is administrator of the division of regulation and enforcement, which is the position most recently held by Guenther Ruch. She has been at OCI for a year as administrator of funds and program management and has been working for the state for 25 years.
  • Rebecca Easland is director of the bureau of financial analysis and examinations and is replacing the retired Roger Peterson. She has been an examiner in the bureau for 10 years, most recently focused on nondomestics.
  • Nitza Pfaff is head of the Agent Licensing Section and is replacing Laurna Landphier (who also retired). She has been at OCI for five years and is a licensed agent herself.
  • Ronnie Demergian is chief of the Property & Casualty Section and is replacing the retired Rhonda Peterson. She has been an agent since 1984 and has been an examiner in the section since 2006.

OCI had also recently announced the departure of Assistant Deputy Commissioner Eileen Mallow and the appointment of J.P. Wieske as legislative liaison director and public information officer. He has worked in the industry for 18 years, most recently as executive director of the Council for Affordable Health Insurance.

Workers Compensation

Ronnie Demergian reported that:

Annual Rate Filing. OCI approved this filing by the Wisconsin Compensation Rating Bureau ("WCRB") with an overall rate reduction of 0.1 percent. Rates in Wisconsin have shown admirable stability, especially compared to the crisis mode in other states with a 70-year annual average increase of 1.7 percent. In response to a question about the reason for the stability in spite of rising health care costs, WCRB President Bernie Rosauer said that high claim costs are offset by good care and getting people back to work, and that all parts of the system work well together. In response to another question, he noted that stability in the political and regulatory environment is also key. As for the high claim costs, he said there are no controls in place for care funded by workers compensation; in fact, about three years ago total medical costs surpassed total indemnity payments to injured workers. Industry members on the Council agreed that this issue needs to be addressed.

Pool Servicing Carriers. In the past, there has been no term limit for the six carriers servicing the pool for employers that cannot obtain workers compensation coverage in the voluntary market. A WCRB survey showed that other states impose term limits and average three or four servicing carriers. The WCRB issued a Request for Proposal with a 5-year term limit and selected three of the existing carriers and one new one. The nonrenewals from the three exiting carriers will be reassigned to the remaining carriers. Bernie Rosauer noted that the increased competition should bring better service and savings of about $4 million a year.

Large Deductible. Carriers have requested this option, which involves the carrier remaining responsible for the deductible amount, but they also obtain reimbursement for that amount from the employer. The option is only for high premium policies. Implementing it would impact the security fund and the Department of Workforce Development ("DWD") and would require changes in the law (after which there would have to be a filing with OCI). Ronnie Demergian declined to provide a timeline, noting that the security fund and DWD have their own timetables. One of the carrier Council representatives noted that this is an important issue for national carriers, who have this option available in other states.

Agent Issues

Market Regulation Bureau Director Sue Ezalarab reported that Commissioner Ted Nickel is looking for a subgroup to discuss agent issues that he and Deputy Commissioner Dan Schwartzer have heard about while visiting insurers. These include how exam questions are generated and reviewed, whether the pass rate is too low, whether the current prelicensing course could be improved, and how continuing education courses are approved. Interested persons should contact OCI Legislative Liaison Jim Guidry. OCI will also reach out to agent groups.

OCI Policy Form and Rate Search Web Page

Sue Ezalarab reported that, as part of its federal rate review grant, OCI has made this page more transparent for consumers by adding a basic search (though the advanced search option is still available). The page receives about 4,000 hits per month, most of which are from the industry. In response to a question, she said the average consumer probably could not use the page for rate comparisons; however, OCI is working on that capability for health insurance and may try to do so for auto insurance.

Legislative Update

Jim Guidry distributed the accompanying list of bills OCI is following this session (with enacted legislation shaded). He highlighted only the following, noting that the legislature will be in session for two weeks in October in addition to a special session on jobs:

  • Acts of Nature. AB 297, which would prohibit property insurers from taking certain actions based on acts of nature, is a recurring bill that has not advanced in the past.
  • Administrative Actions. AB 223 would allow the subject of actions by state agencies, including OCI, to be awarded their costs - if they prevail. The Council member from the National Federation of Independent Businesses noted that such awards are allowed now, but the bill removes the means test.

In response to a question, Jim said that OCI is working on a technical bill, a draft of which he received today. A Council member also noted that the "Mennonite bill" draft (LRB 2883/1) would allow religious groups with fleets of more than 25 vehicles to self-insure with Department of Transportation approval.

He also reported that the most recent National Association of Insurance Commissioners ("NAIC") meeting was cancelled due to Hurricane Irene, but that the NAIC has been quiet on the property and casualty side in any event. In response to a question, Sue Ezalarab said international accounting issues are still percolating, and Jim Guidry added that action on these issues seems to be at least a year away.

Tribal Outreach

OCI Examiner Ashley Natysin reported that reaching out to Wisconsin's sovereign tribes is a priority for the commissioner and deputy commissioner, and that they are traveling to meet with as many tribes as possible to determine their insurance issues, concerns and needs. OCI will provide an update at the next meeting. She also noted that the Department of Administration has a group that meets quarterly to build these relationships.

National Flood Insurance Program

Jim Guidry reported that Congress passed an interim extension of the program to November 18 to allow the House and Senate to work out their differences. The main issues are a limit on FEMA policies (which would prevent it from assuming policies issued by a carrier that is withdrawing from the market) and the program's debt. There has been talk of a 5- to 15-year extension, but at this point there is no way to know what Congress might enact.

Insurance Industry Use of Social Media

Sue Ezalarab reported that the NAIC and OCI have work groups on this subject, and noted that the draft NAIC white paper provided to the Council (along with comments on the draft) was based on work by the Financial Industry Regulatory Authority ("FINRA").

The OCI group is interested in how insurers are using social media. As a result, some staffers got LinkedIn and Twitter accounts and reviewed insurer Facebook pages, and OCI has added interrogatories to its market conduct exams. One finding so far is that insurer use of social media often is not monitored by the insurer's compliance area.

A Council member suggested that this should be a continuing agenda item, noting that his company is looking at this subject and believes it will raise major issues for all lines of business in the industry. In response to a question, Sue Ezalarab said she can recall only one consumer complaint in this area, but that the major issue seems to be online conversations crossing the line into marketing without compliance safeguards. Council members discussed the possibility of recording and saving online activity and suggested that regulators should be flexible in this rapidly developing area (e.g., deciding when online activity becomes a formal complaint).

Other Business

Council Chair John Duwell asked members to nominate topics for the agenda, noting that he wants the Council to continue to be worth everyone's time.

For more information on the Insurance Regulation Group, please contact William Toman at (608) 283-2434 / william.toman@quarles.com or your Quarles & Brady attorney.