KANSAS INSURANCE DEPARTMENT. Annual Report 2014

Transcription

1 KANSAS INSURANCE DEPARTMENT Annual Report 2014

2 The Honorable Sam Brownback Governor of Kansas Statehouse Topeka, KS Dear Gov. Brownback: To the Governor I am pleased to present to you the 2014 Annual Report of the Kansas Insurance Department. The activities herewithin occurred during the term of former Insurance Commissioner Sandy Praeger. This report is established by the provisions of K.S.A and summarizes the activities of the department through the period ending Dec. 31, Sincerely yours, Ken Selzer, CPA Commissioner of Insurance Kansas Insurance Department 420 S.W. 9th St. Topeka, KS Our mission We believe our primary responsibility is to the people whose personal lives or business endeavors are protected by an insurance product in the state of Kansas. We are here to serve them, and we consider this opportunity an honor. Accreditation The Kansas Insurance Department is accredited by the National Association of Insurance Commissioners (NAIC). To achieve this accreditation, the department must meet stringent national standards that demonstrate it effectively monitors insurance company solvency. The Kansas Insurance Department views accreditation by the NAIC as a commitment to Kansas consumers to institute and maintain the highest standards in financial regulation. The accreditation review is repeated every five years to confirm that the Kansas Insurance Department continues to meet all requirements. The department was re-accredited in November 2011.

3 Table of Contents Facts & Figures 2 Examination 6 Deposits 7 KID Divisions 9 Related Entities 12 News releases & consumer alerts 14 Commissioner s Corners 15 Legal Bulletins back inside cover

4 Facts & Figures Insurance company admissions The Kansas Insurance Department has admitted 241 new insurance companies and 538 other companies since Examples of companies in the other category include automobile clubs, third-party administrators and excess lines. Companies admitted in Kansas insurance company other type of company Number of complaints by Kansas county ( ) 1-50 complaints complaints complaints complaints 1001 or more complaints page Annual Report

5 Consumer complaints by type ( ) Accident & Health 6,787 Automobile 3,979 Fire, Allied Lines & Commercial Multi-Peril 343 Homeowners 2,408 Liability 223 Life & Annuity 1,644 Misc. 559 How complaints are filed ( ) 4.9% 3.3% 0.2% 1.4% 2.2% 15.1% 3.5% 10.3% 24.9% letter 5, % 4, % 28.1% 29.0% web 5,978 in person 572 fax 851 other Annual Report page 3

6 Complaints & Inquiries A complaint is a written grievance filed by an insurance consumer or an authorized advocate in which a consumer assistance representative contacts an insurance company. Inquiries are informal questions addressed to representatives. Number of complaints/inquiries 5,000 4,000 3,000 2,000 1,000 4,310 1,414 4,315 1,486 3,804 1,535 3,353 2,125 3,096 2,726 2,696 2,717 3,076 2, complaints inquiries Recoveries Recoveries are the amounts recovered for consumers by the Kansas Insurance Department in excess of the amount initially offered by insurance companies. $6 Total amount recovered (in millions) $4 $2 $0 $5.50 $4.86 $ $ page Annual Report

7 Number of insurance agents by line 50,000 Number of agents 40,000 30,000 20,000 10,000 32,847 10,017 32,826 10,500 49,815 14,356 43,658 16,023 43,949 10,046 32,736 10,013 14,769 4,559 1,403 1,535 casualty crop health life personal lines Nonresident property Resident variable contracts other: bail bonds title travel KID by the numbers in Annual Report page 5

8 Examination Services provided during calendar year 2014 Anti-fraud investigations Open cases investigated 894 Financial examinations completed Domestic (Kansas-based) companies (life) 3 Domestic (Kansas-based) companies (property & casualty) 5 Domestic (Kansas-based) companies (health maintenance organizations) 3 Other domestic (Kansas-based) organizations 6 Market conduct examinations completed Domestic (Kansas-based) companies 1 Foreign (non-kansas-based) companies (fire & casualty) 0 Foreign (non-kansas-based) companies (other than fire & casualty) 14 Other organizations 0 New companies admitted to do business in Kansas Property & casualty 9 Life 3 Accident & health 2 Other organizations (viaticals, auto clubs, excess lines, risk retention, etc.) 32 Licenses issued Agents New resident agents (new licenses issued) 2,464 Total resident agents 22,501 New nonresident agents (new licenses issued) 19,346 Total nonresident agents 92,834 Total agents on file 115,335 Agencies New resident agencies (new licenses issued) 146 Total resident agencies 4,194 New nonresident agencies (new licenses issued) 966 Total nonresident agencies 6,948 Total agencies on file 11,142 Excess lines Excess lines agents 1,597 page Annual Report

9 Deposits Fiscal year 2014 July 1, June 30, 2014 TO THE STATE GENERAL FUND Taxes Premium Tax - Foreign (non-kansas-based) $116,854,955 Premium Tax - Domestic (Kansas-based) $ 17,514,986 Premium Tax - HMO $ 21,356,995 Fire Marshal Tax $ 100,000 Retaliatory Tax $ 16,930,708 Total Taxes $172,757,643 Fines & Penalties $ 680,690 TOTAL REMITTED TO THE STATE GENERAL FUND $173,438,334 TO SPECIAL FUNDS INSURANCE COMPANIES EXAMINATION FUND $ 603,710 INSURANCE DEPARTMENT SERVICE REGULATION FUND Premium Tax $ 1,569,049 MGA notification fee $ 300 Risk purchasing group - notification fee $ 6,750 Annual statement fee $ 141,610 Certificate of authority $ 19,881 Retaliatory fees $ 7,685 Certification fees/utilization review organizations $ 1,050 Prepaid dental $ 500 Form A filing fee $ 30,000 Certified copies $ 7,887 Court fees $ 7,400 Continuing Education Course Fees $ 92,600 Agent license fees $ 2,628,278 Excess lines license fee $ 14,550 Third-party administrators registration fee $ 19,350 Renewal fees $ 9,527,301 Viatical admission fees $ 1,200 Recovery of expenditures $ 23,798 Total service regulation fund $14,099, Annual Report page 7

10 Fiscal year deposits, cont. WORKERS COMPENSATION FUND: Assessments $5,053,571 Reimbursements $ 166,453 Fines & penalties $ 202,053 Total Workers Compensation Fund $5,422,077 MUNICIPAL GROUP-FUNDED POOLS $ 660 GROUP FUNDED WORKERS COMPENSATION FUND $ 12,035 FIREFIGHTERS RELIEF TAX $12,792,517 TOTAL DEPOSITS TO SPECIAL FUNDS $32,930,189 TAXES REMITTED TO OTHER AGENCIES * Fire Marshal, EMS & KU $7,136,536 INSURANCE DEPARTMENT NET DEPOSITS FISCAL YEAR 2014 $206,368,522 *Collected for other agencies in accordance with K.S.A Amount not included in net deposits. Open Records requests by division (2014) 1.34% 4.91% 25.45% 22.54% 45.76% Property & Casualty Division 205 Producers Division 101 Accident & Health Division 22 Consumer Assistance Division 6 Other 112 page Annual Report

11 KID divisions Accident & Health The Accident & Health Division is responsible for the general supervision and regulation of all matters relating to accident and health insurance in Kansas. This involves the process of reviewing policy and certificate forms and rates being offered in the state of Kansas. A&H assists the commissioner in the formation, review and implementation of pertinent health insurance legislation. This division also develops departmental bulletins as needed and responds to questions from insurance companies. Administration The Administration Division is comprised of the commissioner s office, assistant commissioner, actuarial services office, the Firefighters Relief program and reception desk staff. Through the commissioner, the Administration Division sets forth direction for all regulatory and administrative policies and practices of the department. All other divisions within the department work to achieve the vision of the commissioner. The assistant commissioner assists in managing the regulatory responsibilities of the agency and serves as the department s administrative hearing officer. The assistant to the commissioner oversees administrative, scheduling and logistical details for the commissioner. The actuarial services office provides statistical and actuarial regulatory assistance to the commissioner and the other divisions as needed. The Firefighters Relief program organizes all of the firefighter relief programs throughout the state and distributes the annual Firefighters Relief Tax. Anti-Fraud This division is responsible for investigating insurance fraud and educating Kansas consumers about protecting themselves from illegal activity. By focusing efforts to both combat crime and enhance consumer education, the goal is to send a clear message throughout the state that insurance scams and schemes are not tolerated. Comptroller/Building Services The Comptroller s office handles accounts payable and receivables at KID. This division receives and deposits to appropriate accounts more than $160 million each year. Most of these receipts go to the state s general fund. The Comptroller s office also processes vouchers for employee travel, payments related to the department s workers compensation second-injury fund, distribution of aid to firefighter relief districts, and more. The office also handles billing for company examinations and oversees annual assessments required by law. Building services coordinates the procurement of department supplies; routes internal and external mail; and oversees maintenance and repairs to the KID building. Consumer Assistance The primary mission of the Consumer Assistance Division is to better inform and assist Kansas insurance consumers. Consumer Assistance also oversees the independent medical review program and monitors insurance company compliance with laws and regulations designed for the protection of policyholders Annual Report page 9

12 divisions (cont d) Consumer Assistance representatives do not endorse any service, company or person offering any insurance product or service, but they can provide answers to consumer questions. Financial Surveillance This division monitors the financial condition of all Kansas-based insurance companies operating in the state; conducts examinations of insurance companies domiciled in Kansas; reviews all applications that involve the acquisition of domestic insurance companies by another party as provided by the Holding Company Act; coordinates activities pertaining to the Kansas Insurance Guaranty Association Act and the Kansas Life and Health Insurance Guaranty Act; approves the admission of all insurance organizations, automobile clubs, and premium finance companies; and oversees securities deposited by insurance companies. Government & Public Affairs Government & Public Affairs works to represent the interests of the insurance department before the general public, other government agencies and state and federal legislative committees. The division coordinates the development of the legislative and regulatory initiatives of the department for presentation to the Kansas Legislature. In addition, the division serves as a liaison between the department and state and federal agencies on insurance-related matters. The division handles inquiries from the news media and assists the commissioner in communicating department policy to the insurance industry, agents and the public. The division is also responsible for overseeing all social media of the department. GPA also publishes consumer booklets, shopper s guides, brochures, newsletters and news releases, as well as organizing other public relations efforts. Many of these publications also appear on the department s website. Human Resources The Human Resources office provides human resources programs, systems, services and consultation on such topics as organizational planning, recruitment, employment, training, employee relations, benefits, compensation, safety and employee wellness. Human Resources is charged with establishing, administering and effectively communicating policies and procedures that treat employees with respect while meeting management directives and complying with employment and labor laws. Information Technology The IT department is charged with planning, design, acquisition, installation, operation and maintenance of all electronic information systems owned or used by the agency. This includes all information systems hardware, software, infrastructure, data communication facilities and related services. The division stores and secures all electronic information and data maintained by the agency, provides for its lawful and appropriate access, and protects and restricts it from all other access. Services include assistance to staff in use of information systems and data. IT also assists the public and the insurance industry in accessing electronic information and data maintained by the agency to which they are entitled; and transacting business with the agency electronically. This includes development and maintenance of the agency s public website and its insurance industry extranet. page Annual Report

13 divisions (cont d) Legal The Legal Division provides advice and counsel to the commissioner and the operating divisions of the department. The division handles department litigation, including the enforcement of penalties for violations of all Kansas insurance laws and regulations. It also assists all other programs in the interpretation of insurance policy contractual provisions and performs legal research into various aspects of insurance laws and regulations. The division assists all other divisions in the resolution of consumer complaints against insurers, agents and other related entities either informally or formally through an administrative hearing. The division provides legal representation and administration of the Workers Compensation Fund (previously known as the Second Injury Fund). Life The Life Division supervises and regulates matters related to the writing of life insurance in Kansas. The primary function of the division is to review policy forms being offered to Kansas consumers, but the division also oversees all advertising of life insurance products; oversees the proposal of legislation and analysis of proposed laws, tax review and calculation; advises the commissioner; and processes official company papers and certificates. Producers The Producers Division is responsible for the qualification and supervision of agents and agencies in Kansas. It regulates the issuance of licenses through application procedures, examination and background investigation of applicants, and requires continuing education to maintain a license. To ensure compliance with insurance laws, the division monitors the activity of licensees. Additional duties of the Producers Division are the certification of agents and agencies by insurers and the maintenance of licensing records. Property & Casualty The Property & Casualty Division is responsible for the general supervision and regulation of matters relating to the writing of property and casualty insurance companies doing business in Kansas to ensure they are in compliance with the statutes and regulations. This division is also responsible for auditing insurance company annual statement tax and fee forms; reviewing proposed legislation; replying to consumer inquiries and complaints; administering several plans, pools or acts; and issuing licenses to new insurance companies Annual Report page 11

14 Related Entities Workers Compensation Fund: The Legal Division of the Kansas Insurance Department administers the Workers Compensation Fund pursuant to the Kansas Workers Compensation Act, K.S.A , et seq. Attorneys with the Legal Division approve the fund s claim-related expenditures and fund attorney payments. Attorneys throughout Kansas are appointed by the department to protect the integrity and interests of the fund. A detailed accounting of the fund is filed annually with the Governor s office and the Legislature. This annual report is available on the insurance department s website, Firefighters Relief Fund Tax: The Firefighters Relief Fund is used to assist firefighters and their families when accidents or deaths occur in the line of duty. The fund s revenue comes from a 2 percent tax imposed on specific premium written by insurance companies in the state of Kansas. The tax is collected, placed in the Firefigher Relief Fund and distributed to approximately 569 firefighter relief associations in Kansas. The 2014 tax distribution of the fund totaled $11,997,421. Kansas FAIR Plan: The purpose of the Kansas FAIR Plan (Fair Access to Insurance Requirements) is to provide fire, extended coverage, vandalism and malicious mischief, theft and personal liability insurance for qualified applicants unable to obtain this kind of insurance through the private market. A nine-member governing committee oversees the plan. In 2014, there were 14,378 policies in force with a total premium written of $8,677,129. The total amount of insurance in force for 2014 was $968,312,018. There were 682 losses reported in 2014, and $2,629,943 was paid in losses. Kansas Automobile Insurance Plan: The Kansas Automobile Insurance Plan (KAIP) provides coverage for drivers who are unable to purchase automobile insurance in the private market. In 2013, the most recent year for which figures are available, the KAIP collected premiums totaling $1,320,056 and paid out $1,155,262 in losses. Kansas Underground Storage Tank Liability Plan: The purpose of the Kansas Underground Storage Tank Liability Plan is to provide owners/operators of petroleum underground storage tanks a method to achieve compliance with the financial responsibility requirements adopted by the federal Environmental Protection Agency. The plan operates under the authority of K.S.A ,126. For the fiscal year ending June 30, 2014, the plan issued 971 policies covering an average of 4,927 tanks and wrote $762,048 in premiums. Three claims were reported. Three claims were paid. $250 in new case reserves were established. Kansas Health Care Provider Insurance Availability Plan: The Kansas Health Care Provider Insurance Availability Plan provides medical malpractice coverage to qualified health care providers who are unable to procure coverage in the private market. The plan is administered by Kansas Medical Mutual Insurance Co. and governed by a nine-member board appointed by the Commissioner of Insurance. For the fiscal year ending June 30, 2014, the plan wrote $1,610,700 in premiums and incurred $629,977 in losses/loss adjustment expense. page Annual Report

15 Group-funded pools: Employers including municipalities, may enter into agreements to self-insure certain insurance exposures as a group under the authority of two separate Kansas statutes. Group-Funded Workers Compensation Pools: Authorized under K.S.A , this law permits five or more employers in the same or similar business that belong to the same bona fide trade or professional association, which has been in existence for at least five years, to enter into agreement to pool their liability for Kansas workers compensation benefits and employers liability. These pools are required to have a combined members net worth of at least $1,000,000; a combined annual workers compensation premium of $250,000; and specific aggregate excess workers compensation insurance. Eight of these pools were licensed in Five or more employers engaged in dissimilar types of business, under K.S.A (b), may form a pool. These pools are required to have a combined members net worth of at least $1,250,00; a combined annual workers compensation premium of $500,000; and specific and aggregate excess workers compensation. Zero certificates of authority were issued in The Kansas Municipal Group-Funded Pool Act: This act was established under K.S.A and allows five or more municipalities to enter into agreement to pool their liabilities for all fire and casualty lines, including workers compensation and employers liability. Property, casualty and workers compensation pools must meet certain requirements, but municipal pools must have $250,000 in premium per line of insurance and may substitute adequate surplus funds in place of excess insurance. Municipalities may also pool their liabilities for accident, sickness and life insurance lines. Accident and sickness pools must have at least $1,000,000 in gross annual premium and may substitute adequate reserves with excess loss insurance. The oversight of municipal group-funded pools is divided between the Property & Casualty and Accident & Health divisions. There were a total of seven municipal pools with certificates of authority under K.S.A as of Dec. 31, Zero currently funded municipal pools were involved in the transaction of life insurance. One currently funded municipal pool was involved in the transaction of health insurance. Six currently funded municipal pools were involved in the transaction of property & casualty insurance. Workers Compensation Assigned Risk Plan: The Kansas Workers Compensation Insurance Plan operates under the authority of K.S.A The plan provides workers compensation and employers liability insurance for qualified applicants unable to procure coverage in the regular market. Information from the National Council on Compensation Insurance, which administers the Workers Compensation Assigned Risk Plan, shows the following statistics: Number of risks 9,141 (as of 12/31/14) New plan applications 2,756 (as of 12/31/14) Written premium $48,931,000 (as of third quarter 2014) Incurred losses $31,707,288 (as of third quarter 2014) 2013 Loss ratio 64.8% (as of third quarter 2013) 2014 Annual Report page 13

16 2014 news releases & consumer alerts February 26 - Insurance Commissioner Sandy Praeger warns consumers about proposed legislation March 6 - Insurance Department will allow companies to extend current policies under new HHS rule March 21 - Spring storm season: Is your insurance ready for it? April 3 - Insurance Commissioner Sandy Praeger receives national Health Quality Leaders award April 7 - Retirement planning means preparing for Baby Boomer set of financial challenges April 28 - Insurance information assistance available for weather disaster victims May 14 - Insurance Commissioner Sandy Praeger names new department comptroller May 22 - Check out ridesharing services insurance liability, Commissioner says July 2 - Check with companies, employers about stop-smoking services, benefits August 4 - Get insurance needs in place for your college-bound student September 9 - Know your life insurance basics October 3 - Drive defensively during deer season October 22 - Vehicle insurance fraud case supported with KID assistance October 24 - Watch out for Medicare Part D, Advantage fraud during the open-enrollment period November 13 - Assistant Insurance Commissioner Anshutz accepts new employment November 21 - Commissioner Praeger receives national award November 25 - Four directors to retire from insurance department December 11 - Insurance Commissioner Sandy Praeger to be honored at public reception Dec. 22 July 9 - Insurance Commissioner Sandy Praeger makes Firefighters Relief Fund distribution page Annual Report

17 2014 Commissioner s corner columns January - Resolve to get insurance coverage in order for the new year - There is not a lot of time to think about insurance during the hectic rush of the holidays, but as you begin the New Year, it is a good idea to evaluate your insurance coverage. These tips and reminders concerning homeowners/renters insurance, auto insurance and health insurance will help with your review. February - Just got engaged? Don t forget to talk about insurance - Planning a wedding is exciting and time consuming. One not-soexciting but just as important factor to discuss is what to do about insurance needs. The Kansas Insurance Department staff and the National Association of Insurance Commissioners (NAIC) have some insurance tips for couples who are about to say I do. March - Keep your insurance on course before and after a car accident - If you were in an accident, would you know what information you need for an insurance claim? The Kansas Insurance Department and the National Association of Insurance Commissioners (NAIC) offer easy-to-follow tips to get the necessary information following a car crash. April - Time for a homeowners insurance checkup? - What is the value of the contents of your home covered by insurance? Is a flood covered? If someone is hurt while visiting you, will insurance pay medical expenses? Whether you are a renter or homeowner, we suggest an annual review of your homeowners or renters insurance. This will let you evaluate whether the coverage is still adequate for your current situation. May - KID-operated Firefighters Relief Association directly benefits Kansas firefighters, districts - One of the most beneficial activities that the Kansas Insurance Department is charged with is administering the statewide Firefighters Relief Assocation. Approximately 15,000 Kansas firefighters, both volunteer and salaried, receive benefits as a result of this funding. It also helps the families of firefighters who lose their lives in the performance of their duties, through death benefits and funeral expenses Annual Report page 15

18 Commissioner s Corner (cont d) June - Know the smart insurance considerations when buying a vehicle - It s the beginning of summer, and many of us are thinking about hitting the road for a trip or vacation. I would encourage you to take a few moments to review 10 insurance considerations that go along with a vehicle purchase. July - Fighting insurance fraud is an important department job - The Anti-Fraud Division of the Kansas Insurance Department worked nearly 850 cases of suspected insurance fraud in Kansas during By all accounts, insurance fraud is the second largest economic crime in America. This type of fraud is the intentional misrepresentation of facts and circumstances to an insurance company in order to obtain payment that would not otherwise be made. August - State regulation of insurance is the best way to protect consumers - I have been Insurance Commissioner in Kansas for almost 12 years, and during much of that time some people have proposed that the federal government regulate insurance. Based on my experience, I believe state insurance regulation has worked well and keeps getting better. I also believe that however well-meaning the idea is, federal regulation of insurance would not be as effective. September - Earthquake insurance coverage can be an option to homeowners policies - The recent spate of measurable earthquakes in Oklahoma, California, and even in Kansas have prompted some consumers and the media to wonder about earthquake insurance options. Earthquake coverage is not a part of a regular homeowners, renters or condominium insurance policy. If your insurance company offers it, coverage can be added by including an endorsement to your policy or by purchasing a separate earthquake policy. October - Department addresses long-term care insurance costs - Insurance regulators at the Kansas Insurance Department have a mission to protect Kansas consumers when it comes to insurance products. We also oversee companies who do business in the state by making sure they have sufficient money in reserve and by tracking how stable their market is. Sometimes it is challenging to balance those objectives. Our department took steps to find a balance between the legitimate concerns of both consumers and companies. November - Kansas online insurance exchange enrollment opens Nov Kansans who want to compare health and dental plans and then purchase them through the Affordable Care Act s online marketplace can do so starting on Sunday, Nov. 15, the beginning of the second online open enrollment. December - Then-now insurance comparison shows Kansas insurance accomplishments - As I near the end of my stewardship as Kansas Insurance Commissioner, I found some interesting statistics about the insurance industry in Kansas while cleaning out some old files. The comparisons show how insurance in Kansas has changed over the past dozen years. page Annual Report

19 2014 legal bulletins May 22 - Bulletin RE: Life Insurance and Annuity Advertising by Independent Marketing Organizations SUMMARY: In February 2012, the Kansas Insurance Department issued Bulletin reminding life and health insurers of their responsibility for advertisements produced and distributed by third-party marketing entities. The purpose of the current Bulletin is to make clear that this responsibility applies to the marketing activities of third-party intermediaries most commonly known as Independent Marketing Organizations (IMOs) and Field Marketing Organizations (FMOs). July 8 - Bulletin RE: Association Health Plans SUMMARY: In order to ensure that farmers cooperatives and other qualified trade, merchant, retail, or professional associations or business leagues are properly assessed and submit payment of the required annual 1% premium tax, the Department requests that no later than March 1 of each calendar year, beginning March 1, 2015, all health insurers and third party adminsitrators authorized to transact business in Kansas submit a list of any and all associations or business leagues offering coverage under the provisions of K.S.A that have contracted with them for services related to the creation or administration of health plans. October 14 - Bulletin RE: Kansas Insurance Loss Report Form SUMMARY: K.S.A. 40-2,110 requires every property and casualty insurance company transacting business in this state to file with the state fire marshal a monthly report of each fire loss that exceeds $ We have been advised by the Kansas Fire Marshall s Office that insurance companies are not reporting fire losses to their agency as required by K.S.A. 40-2,110, K.A.R and The regulations establish the reporting forms insurers must use. November 14 - Bulletin RE: Professional Liability Coverage for Defined Health Care Providers Practicing in Kansas SUMMARY: 2014 House Bill 2516 (Ch. 56, 2014 Session Laws) amended the definition of health care provider to include physician assistants, nursing facilities, assisted living facilities, residential health care facilities and certain advanced practice registered nurses (certified in the role of nurse midwife) as of January 1, It has come to our attention that some insurance companies may not be aware that, to write professional liability coverage in Kansas, they must have Malpractice Liability listed on their Certificate of Authority. It may also be necessary for your company to submit new or revised rate/rule and form filings to this office Annual Report page 17

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