Division of Insurance Annual Report, 2003

2004·9.7 MB·English

by  Massachusetts. Division of Insurance.

Commonwealth of Massachusetts
Division of Insurance
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State Library of Massachusetts
- State House, Boston
2003
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COMMONWEALTH OF MASSACHUSETTS
Office of Consumer Affairs and Business Regulation
DIVISION OF INSURANCE
One South Station • Boston, MA 02110-2208
[phone] • FAX [phone]
TTY/TDD [phone]
http://www.state.ma.us/doi
MITT ROMNEY BETH LINDSTROM
GOVERNOR DIRECTOR,CONSUMERAFFAIRS
ANDBUSINESSREGULATION
KERRY HEALEY JULIANNE M. BOWLER
LIEUTENANTGOVERNOR COMMISSIONEROFINSURANCE
March 1,2004
To the Honorable Members ofthe General Court and the Citizens ofthe Commonwealth:
Central to the Division's mission to protect insurance consumers and maintain stable markets is the task
of ensuring that insurers remain financially viable so they may follow through with their responsibilities
to policyholders. The ongoing review ofinsurers' solvency is largely accomplished through the work of
the Division's Financial Examination and Surveillance staffs. I am pleased to report that the quality of
their work was recognized in 2003 by the National Association of Insurance Commissioners, which
approved a full 5-yearre-accreditation to the Division for its work in reviewing financial solvency.
Recognizing adverse market trends and responding in an effective, collaborative manner is another
regulatory responsibility. In 2003, the Division undertook a review ofthe private passenger automobile
insurance residual market and its impact on existing insurers, acknowledging the exit ofseveral insurers
from this market in recent years and the further erosion of options for consumers. The Division
investigated brokers who allegedly engaged in the sale ofunauthorized health plans in Massachusetts. At
a time when consumers are seeking less costly health coverage, the Division will continue to ensure that
those who sell health insurance products are responsible for knowing that theirproducts are approved and
in compliance with our laws. The Division also commenced a national market conduct examination of
the UnumProvident Corporate Group. In concert with other state insurance regulators, the Division is
reviewing the member insurers' group and individual disability income claims and policy administrative
practices.
On the front lines everyday for consumers is the Division's Consumer Service section, which in 2003
responded to more than 40-thousand consumer inquiries and recovered nearly $2 million for
policyholders. I invite you to review the dedicated work and accomplishments of the Division of
Insurance staffduring 2003 and welcome any questions or comments you may have.
Respectfully submitted,
tfulianne M. Bowler
Commissioner ofInsurance
Division ofInsurance
Table of Contents
Financial Surveillance & Company Licensing 1
Financial Examination 2
Market Conduct 5
Special Investigations & Enforcement 6
Consumer Service 7
Board ofAppeal on Motor Vehicle
Liability Policies & Bonds 8
State Rating Bureau 9
Administration 12
Management Information Systems 12
&
Hearings Appeals 13
Office ofthe General Counsel 14
Producer Licensing 15
Acts, Regulations & Bulletins 16
Appendices
2003 Annual Report
Division ofInsurance 1
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Financial Surveillance
Company
Licensing
The Financial Surveillance section monitors the solvency of Massachusetts'
91 domestic insurance companies, which are among the 1,371 insurance
companies licensed or authorized to transact insurance business in the
Commonwealth. Included in this number are life insurers, accident and
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health insurers, property casualty insurers, health maintenance
organizations, fraternal benefit societies, title insurers, surplus lines insurers
and reinsurers. Financial Surveillance also monitors transactions entered
into by Massachusetts' domestic insurers.
The Company Licensing staffis responsible for the review and processing of
all applications from insurers seeking to obtain or amend licenses to transact
insurance business in the Commonwealth. During 2003, twenty-three
insurers were newly licensed and sixteen others received approval to amend
their licenses to sell additional lines ofinsurance.
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The Financial Surveillance Company Licensing staff also processes
license certifications, analyzes annual statement filings and manages other
revenue collections that resulted in approximately $450,000 in revenue in
2003.
In December 2002 and May 2003, the Division of Insurance approved
petitions submitted by The Savings Bank Life Insurance Company of
Massachusetts and Massachusetts Mutual Life Insurance Company
respectively to exceed the "safety fund" limit set forth in M.G.L. Chapter
175, section 141 by the amount ofthe net admitted deferred tax asset due to
a change in statutory accounting principles, which requires deferred taxes to
be treated as an asset.
2003 Annual Report
Division ofInsurance 2
Financial Examination
The Financial Examination section plays a vital role in monitoring the
solvency of insuring organizations chartered in Massachusetts, principally
by conducting on-site audits of domestic licensees. In 2003, Massachusetts
was the domicile of fifty-six property/casualty insurers, nineteen life,
accident and health insurers, two title insurance companies, nine health
maintenance organizations, two lodge fraternal organizations, three medical
service corporations, twenty-five workers' compensation self-insured
groups, a number of residual market pools, (e.g., FAIR Plan and
Commonwealth Automobile Reinsurers) and over one hundred fifty fraternal
benefit societies. In 2003, these licensed or approved insurers wrote a total
of$54.8 billion in direct premium worldwide.
The statutory requirement for the examination of insurance companies and
health maintenance organizations is every five years, three years for self-
insured workers' compensation groups, three years for medical service
corporations, (e.g., Blue Cross and Blue Shield of Massachusetts) and three
years for fraternal organizations. The examination schedule may be
accelerated ifregulatory needs arise.
In 2003, the Financial Examination section completed examinations of
twenty-four insuring organizations. The section continued its special
purpose examinations of domestic managed care organizations to evaluate
their premium rate setting processes. Examinations were also conducted of
twenty-five fraternal benefit societies. Thirty-one examinations were in
progress at year's end.
Insurers undergoing examination by Division staff are charged $300.00 per
day per examiner plus expenses. In fiscal year 2003, examination revenues
totaled $707,000. Massachusetts domiciled life insurers are assessed
annually for the actuarial valuation and certification of their reserves.
Assessments paid in 2003 for calendar year 2002 totaled $546,000. The
Division also collects state taxes on the excess and surplus lines business
written by special brokers licensed in Massachusetts. Collections in
calendar year 2003 totaled $21.3 million.
2003 Annual Report
Division ofInsurance 3
FINANCIAL EXAMINA TIONREPORTS ISSUED
AS OFDECEMBER 3L 2003
Nationwide Massachusetts
Type DirectPremium DirectPremium Surplus
Archdiocese ofBoston Self-Insured Group SIG $4,504 $4,504 $10,005
Blue Cross Blue Shield ofMA, Inc. Target Exam H n/a n/a n/a
BostonMutual Life Insurance Company L 188,842 53,256 56,964
Catholic Association ofForesters F 305 222 2,361
CIGNA HealthCare ofMA, Inc. Target Exam H n/a n/a n/a
Commonwealth Manufacturers Comp. Corp. (TPAAssoc.) SIG
ConnectiCare ofMA, Inc. Target Exam H n/a n/a n/a
Delta Dental ofMA, Inc. H 285,688 285,688 100,325
Fallon CommunityHealth Plan, Inc. H 586,114 586,114 64,403
Fallon CommunityHealth Plan, Inc. Target Exam H n/a n/a n/a
Fallon Health & Life Assurance Company L 229 229 3,420
FirstAllmerica Financial Life Insurance Co. L 175,463 9,692 523,466
LibertyMutual Insurance Co, TargetExamination P&C n/a n/a n/a
LibertyMutual Fire Insurance Co. Target Examination P&C n/a n/a n/a
Mass. Automotive CompensationCorp. (TPAAssoc.) SIG
Mass. Homeland Ins. Co. (One BeaconGroup) P&C 224,257 224,257 9,531
Massachusetts Biotechnology SelfInsurance Group (Chubb) SIG 46 46
Massachusetts Electronics Industry Group (Chubb) SIG 605 605
MIIA Property-CasualtyGroup, Inc. SIG 19,920 19,920 59,180
Medical Profess. Mutual Ins. Co. Target Exam P&C n/a n/a n/a
One HealthPlanofMA, Inc. H 11,235 11,235 1,313
One HealthPlan ofMA, Inc. Target Examination H n/a n/a n/a
Pro Select insurance CompanyTarget Examination P&C n/a n/a n/a
Tufts AssociatedHMO, Inc. Target Exam P&C n/a n/a n/a
Total $1,497,208 $1,195,768 S830.968
Legend:
F =Fraternal BenefitAssociation
LAH = Life, Accident& Health
P&C = Property/Casualty
H=Health Entity
O =NonRiskBearing Insurance Entity
SIG = Self-Insured Group
T = Title Insurance Company
2003 Annual Report
Division ofInsurance 4
FINANCIAL EXAMINATIONS INPROGRESS
AS OFDECEMBER 3L 2003
Nationwide Massachusetts
Type DirectPremium DirectPremium Surplus
DOI Staffed Examinations In Progress
Arrow Mutual Insurance Company P&C 4,611 4,485 27,045
Bunker Hill Insurance Company (Plymouth Rock Group) P&C 28,765 28,765 8,590
Eastern Casualty Insurance Company P&C 6,415 4,494 45,989
Holyoke Mutual Ins. Co in Salem P&C 85,892 58,464 45,476
Employers Fire Insurance Company (OneBeacon Group) P&C 118,629 25,090 42,890
American Employers Ins. Company(OneBeaconGroup) P&C 280,262 15,278 103,689
New England Life Insurance Company L 2,049,234 230,278 157,934
NorthernAssurance Co. ofAmerica (One Beacon Group) P&C 184,896 27,956 115,974
OneBeaconAmerican Ins. Co. (OneBeacon Group) P&C 689,608 95,410 382,723
HealthNew England H 183,316 183,316 10,420
PilgrimInsurance Company(Plymouth Rock Group) P&C 48,091 48,091 4,622
Plymouth RockAssurance Corp. (Plymouth RockGroup) P&C 145,610 142,715 67,584
Supreme Council ofthe Royal Arcanum F 2,830 461 11,263
Subtotal - DOI Staffed Examinations 3,828,159 864,803 1,024,199
Field Work Completed - Report in Process
CommonwealthAutomobile Reinsurers
Subtotal - Reports In Process
Contracted Examinations In Progress
CIGNA HealthCare ofMA, Inc H 186,898 186,898 194,722
Boston Old Colonv Insurance Comnanv P&C 128,086 89,743 13,785
ConnectiCare ofMA, Inc. H 14,631 14,631 2,187
Harvard PilgrimHealthCare H 1,151,209 1,151,209 140,160
PilgrimHealth Care H 912,593 886,570 112,033
JohnHancockLife Ins. Co H 10,923,026 3,572,914 3,514,141
John HancockVariable Life Ins. Co. L 1,703,168 133,441 587,093
Paul Revere Life Ins Co. L 846,489 23,801 911,413
Paul Revere Variable Life Ins. Co. L 31,967 873 134,708
Tufts Associated HMO, Inc. H 2,306,733 2,306,733 188,536
Subtotal - Contract Exams in Progress 18,204,800 8,366,813 5,798,778
Field WorkCompleted - Report in Process - Contracted
Arbella Muftial Insurance Co P&C 460,860 460,860 213,032
Arbella Protection Insurance Co. P&C 155,305 126,129 38,629
Arbella Indemnity Insurance Co. P&C 11,955 9,253 11,233
Arbella Life & Health Insurance Co. L 4,310 4,310 5,550
CommonwealthMutual Insurance Co. P&C 27,463 27,463 5,500
CommonwealthReinsurance Company P&C 7,125
Subtotal 659,893 628,015 281,069
Total - DOI and Contracted Examinations $22,692,852 $9,859,631 $7,104,046
2003 Annual Report
Division ofInsurance 5
Market Conduct
The Market Conduct section is responsible for: (1) monitoring the
compliance of domestic and foreign licensed entities with Massachusetts
insurance laws and regulations; (2) conducting and supervising market
conduct examinations; (3) ensuring that settlements ofinsurance class action
lawsuits are implemented in fairness to consumers; and (4) participation in
National Association ofInsurance Commissioners ("NAIC") market conduct
working groups. The activities of the Market Conduct section in 2003
included:
• Initiation of a multi-state market conduct examination of companies in
the UnumProvident Corporate Group, including Massachusetts domestic
Paul Revere Life Insurance Company. In conjunction with other lead
states Maine and Tennessee, the Division is examining the claims
handling and policy administrative practices ofthe companies' individual
and group disability insurance operations on a nationwide basis;
• Initiation of forty-six (46) limited scope market conduct examinations
including: Eighteen (18) domestic life insurers concerning the U.S.
Patriot Act; Twenty-five (25) property and casualty insurers concerning
Safe Driver Insurance Plan ("SDIP") premium adjustments; One (1)
domestic life insurer concerning its disability claims handling and policy
administrative practices; One (1) domestic life insurer concerning
policyholder service and other targeted areas; One (1) foreign life and
health insurer concerning marketing and sales practices for health
insurance products.
• Initiation of six (6) comprehensive market conduct examinations of
domestic life and property and casualty insurers;
• Completion oftwo (2) limited market conduct examinations ofdomestic
life insurers in response to ratings downgrades and resulting increase in
surrender and replacement activity.
2003 Annual Report
Division ofInsurance 6
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Special Investigations Enforcement
The Special Investigations staff pursues allegations of misconduct by
Division licensees including insurance producers, advisors, public adjusters,
insurance companies and health maintenance organizations. These
investigations include the review of documented evidence supporting
allegations of unfair methods of competition, unfair and deceptive acts or
trade practices and other violations of insurance law and regulations.
Referrals come from the general public, other state and federal investigative
and prosecutorial agencies as well as other sections within the Division of
Insurance.
Enforcement actions include letters of reprimand, cease and desist orders,
the establishment of compliance programs, license sanctions such as
revocation or suspension and the imposition of civil fines or assessments
through negotiated settlements or administrative hearings. Special
Investigators or enforcement counsel make referrals to federal and state
government agencies and report evidence of criminal activity to the
appropriate law enforcement authority. Enforcement actions are reported to
the National Association of Insurance Commissioners' Regulatory
Information Retrieval System and posted on the Division's website.
For calendar year 2003, Special Investigations and Enforcement:
• Opened 355 cases;
• Closed 322 cases, resulting in $1,431,210 in fines and assessments and
$168,158 in restitution;
• Suspended or revoked 49 licenses and issued 135 cease and desist orders;
• Referred 155 cases for enforcement action.
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2003 Annual Report