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Property and Casualty Advisory Council

Insurance Regulation Law Update William J. Toman

Commissioner Ted Nickel introduced staff in new positions at the Wisconsin Office of the Commissioner of Insurance ("OCI"):

  • Barry Haney, an examiner in the market regulation bureau since 2009, is the consumer complaints supervisor.
  • Pam Johnson is the workers compensation expert. She joined OCI recently after previously working at independent agencies and insurers.
  • J.P. Wieske is the legislative liaison and public information officer. He has worked at health insurer AMS and most recently served as executive director of the Council for Affordable Health Insurance.

The Commissioner also shared an anecdote regarding the Local Government Property Insurance Fund, which arose in the course of someone researching the Fund in a legal capacity. The Fund was started by Bob LaFollette because he didn't like insurers and wanted a coverage source for local governments. Shortly after that, the State Capitol burned down, and the state itself did not have enough coverage.

Finally, the Commissioner thanked Council Chair John Duwell, who is retiring from West Bend Mutual and the Council this year, and presented him with a plaque.

Legislative Update

Jim Guidry, an OCI legislative analyst, distributed the accompanying list of bills OCI is following this session (with enacted or stalled legislation shaded). He noted there is not much pending on the property and casualty side, and he highlighted only SB 378, which was introduced yesterday by Sen. Lasee (R-De Pere). The bill conforms Wisconsin surplus lines taxation with Dodd-Frank's Non-admitted and Reinsurance Reform Act, but does not adopt either of two competing models for sharing taxes among the states (on which there has been no consensus). The bill also corrects auto insurance law by deleting the limitation of required coverage and minimum limits to owned motor vehicles and makes technical changes in the insurance security fund. In response to a question, J.P. Wieske said there will be an Assembly companion bill, but that there have been some political issues arising from raw nerves remaining from AB 210.

On the federal level, Jim Guidry noted that the Federal Insurance Office ("FIO") is issuing its report this month on the future of insurance regulation after receiving a lot of comments on the subject. He is not sure what the report will say, but the FIO director, who was the Illinois Director of Insurance, has been supportive of state regulation. Also on the federal level, the Financial Stability Oversight Council continues its work on rules regarding systemic risk presented by financial institutions, but property and casualty companies are largely exempt.

National Association of Insurance Commissioners ("NAIC")

J.P. Wieske reported that the NAIC looks like it will take the legislative approach to implementing the Own Risk and Solvency Assessment ("ORSA"). Regulators will be better able to keep the self-assessment confidential under that approach. It will be a while before the NAIC completes its work on ORSA.

Stakeholder Outreach

OCI Examiner Ashley Natysin reported that she has completed visits with Wisconsin's sovereign tribes. There were several themes common to many of the tribes:

  • Lack of available credit-repair providers.
  • Lack of financial literacy programs.
  • Need for basic insurance information, such as what coverage is available and whether tribe members must have auto insurance off the reservation.
  • Difficulty obtaining quotes for non-gaming operations (such as administration buildings and police cars).
  • Being able to work with the industry without losing tribal sovereignty.
  • Health care concerns (many tribes have their own clinics; members rely on private health insurance).
  • Lack of awareness of funds administered by OCI.

The tribes were happy that OCI visited their communities, and OCI is working to answer the questions that came up. The tribes are working with OCI to get their benefit administrators talking to each other. OCI will also be reaching out to the industry and other organizations to respond to the tribes' needs. For example, OCI is working with the Department of Financial Institutions on financial literacy. See the Financial Literacy section below.

J.P. Wieske noted that the Governor's Read to Lead initiative, which seeks to ensure that Wisconsin students learn to read by the fourth grade. OCI will be reaching out to the industry for assistance with that effort.

National Flood Insurance Program

Jim Guidry reported that Congress passed another extension of the program to May 31, 2012 just before it expired. There is a broad consensus for reform, but efforts always seem to break down over the program's $18 billion in debt. There has been talk of privatization, but that would be way down the road.

Insurance Industry Use of Social Media

OCI market regulation director Sue Ezalarab reported that the NAIC issued a draft white paper on this subject, which she provided to the Council. There were a few changes in the draft after a conference call in December, mainly in allocating responsibility between agents and insurers. After the white paper is adopted, the NAIC will establish standards for use in market conduct exams.

OCI already covers social media in examinations and has found a wide variation in how insurers deal with it (e.g., whether it is mentioned in agent contracts). OCI has also found that an insurer's compliance area is not usually involved with its use of social media, and that agents separately make use of social media. To provide further background, OCI may ask an insurer to make a presentation on its approach to social media.

Other Business

Office of Foreign Assets Control ("OFAC"). Sue Ezalarab reported that OCI received an inquiry on OCI's role with OFAC, which enforces U.S. economic and trade sanctions. OCI has no role and generally refers inquiries to the OFAC website; however, some regulators have issued bulletins. Also, OFAC asked the NAIC to make insurer compliance with its requirements a part of market conduct exams, but regulators have done so only to a limited extent (e.g., anti-money laundering safeguards).

OCI Consumer Complaint System. Sue Ezalarab reported that OCI is upgrading its platform for this system and hopes the platform will allow electronic interactions with insurers this year via online accounts they will set up. OCI is also looking at a possible early resolution component to the process that will allow resolution of issues before they become formal complaints that must be reported to the NAIC (if OCI must contact the insurer, it is deemed to be a complaint). When consumers ask about an insurer's complaint record, OCI explains that a complaint does not mean the insurer did anything wrong.

Financial Literacy

David Mancl of the Department of Financial Institutions explained his agency's efforts to elevate the level of financial literacy among Wisconsin residents. The Governor formed the Council on Financial Literacy last year with 25 members from higher education, nonprofits, business, government and academia.

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