We have certainly been witness to not only an extremely busy legislative season and an unfortunately devastating year of catastrophes, but also a fairly active regulatory environment. At the end of the third quarter, more than 18,580 statutes, regulations, and bulletins impacting the insurance industry had been newly created, revised, or issued since the beginning of the year. Additionally, state legislatures and Congress had introduced nearly 11,000 bills affecting insurers.
But even though the adjournment of many states' sessions reduces the legislative monitoring somewhat as we head into this last quarter of 2011, the inevitable regulatory activity persists. It's not difficult to find a number of examples already.
New Jersey recently revised regulations addressing the acceptance, renewal, nonrenewal and cancellation of private passenger automobiles policies. Effective Sept. 19, 2011, NJAC 11:3-8.2 has a revised definition of "acceptance criteria." Another regulatory section, NJAC 11:3-8.5, provides standards for the issuance of nonrenewal notices, including policy nonrenewals for insureds who are ineligible persons for failure to meet the insurer's acceptance criteria in an amount not to exceed 2 percent of the insurer's in force voluntary market policies in each rating territory.
Yet another change involves the renumbering of NJAC 11:3-8.11 to NJAC 11:3-8.12, with new provisions on acceptance criteria, the written standards by which an insurer accepts or rejects new business, and/or renews or nonrenews existing business. Insurers are now required to have separate acceptance criteria for new and renewal business. Additionally, these acceptance criteria must be maintained in writing, indicate the effective date, and be made available to the Department of Banking and Insurance upon request.
As of Nov. 18, 2011, insurers are limited to using only the acceptance criteria that were in effect at the initiation of the policy period during which the actual nonrenewal notice was issued to nonrenew the policy. However, this limiting provision does not apply to the first policy period following Nov. 18, 2011, except for amendments to the acceptance criteria made after that date. A certification must be filed by every insurer, in the form set forth in Subchapter 8's Appendix, stating that the insurer is not using any of the prohibited acceptance criteria.
The Connecticut Insurance Department proposed regulations on Aug. 31, 2011, with a projected effective date of Jan. 1, 2012, concerning a territorial rating system for private passenger automobile insurance. This proposal is intended to implement the territorial rating system for private passenger nonfleet automobile insurance rates and its requirements for use provided for in Public Act 10-7.
These regulations include the establishment of standards for territorial classifications, rate filing procedures, and rate filing information. Additionally, these would provide standards and directives for credibility procedures, classification factors, variable cost loading, flat dollar cost loading, filing update timelines, supporting information requirements and actuarial exhibits.
Insurers must not only watch the proposed and adopted regulations, but also consider what might be on the horizon. Sometimes we get an "inkling" of what's to come. For example, the Rhode Island Division of Insurance recently indicated in Insurance Bulletin Number 2011-7 that it will be revising Regulation 38 to address the changes to its notice of premium or coverage changes and insureds' right to loss information. Two bills from this year's legislative session, SB 498Aaa and HB 5465B, effective Jan. 1, 2012, impact the requirements under this regulation.
Across the country in Washington, a preproposal statement of inquiry (Insurance Commissioner Matter No. R 2011-17) announced that the commissioner is considering adopting rules concerning property and casualty insurance rates setting. Issues to be addressed include rate cap rules, transition rating rules, rate stability formulas, and other rating methods. Prospects for the potential revisions include establishing processes and procedures for insurers when these types of rating methods are used.
All of the above demonstrate the year-round, dynamic nature of our insurance regulatory environment. Without a doubt, 2011 is on track to be a particularly active year from a regulatory and legislative perspective.
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