April 19, 2012
Contact: David Neustadt 212-709-1691
DEPARTMENT OF FINANCIAL SERVICES GETS HARTFORD LIFE TO PAY $24 MILLION TO 300,000 COVERED BY ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE POLICIES
Company Failed to Comply with 60% Minimum Loss Ratio Required in New York; Agrees to Implement Corrective Action Plan, Superintendent Lawsky Says
Benjamin M. Lawsky, Superintendent of Financial Services, today announced that approximately 300,000 people who bought mass marketed accidental death and dismemberment insurance policies are being credited $24 million by Hartford Life Insurance Company. In addition, the company will reduce premium rates for existing and new enrollees by 45 percent.
Hartford will issue the credits because it didn’t comply with the 60 percent minimum loss ratio (MLR) required under New York law for plans such as the company’s accidental death and dismemberment insurance policies, Superintendent Lawsky said.
“Enforcing the rule about how much of premiums are spent on health care as opposed to administration and profit helps keep premiums down and ensures that most of what people pay actually goes to care,” Superintendent Lawsky said.
The MLR is the percentage of premium dollar that must be spent on claims. Hartford failed to meet the 60 percent level because it overestimated the amount of money that would be spent to pay claims when the policies were priced by the insurer. An MLR is designed to prevent insurers from capturing excessive profits.
“Hartford reported the lower than required MLR to the Department of Financial Services and has submitted a corrective action plan. The insurer will reduce the premium and give premium credits to people already covered by the policies,” the Superintendent said.
Accidental death and dismemberment coverage pays benefits when an insured individual dies as the result of an accident or if the individual loses limbs or sight as the result of an accident.
Hartford sold the policies by means of telemarketing and other forms of mass marketing targeted to members of associations and customers of banks and other financial institutions.
Under the corrective action plan it filed with the Department, Hartford will decrease rates going forward by 45 percent for insured individuals and individuals who buy new policies. In addition, the company will provide premium credits to currently insured individuals in the form of a 35 percent discount for 36 months. The aggregate credits will equal $24 million.
The credits and premium adjustments will mean that currently insured individuals will be able to pay only about $35 annually for coverage for the next three years. Individuals who buy new policies will pay about $55 annually.
Individuals who dropped coverage will be able to obtain compensation provided they contact the insurer.
Hartford agreed to provide the Department with reports showing its progress in satisfying the terms of the corrective action plan every 90 days until the plan is completed.
A copy of the stipulation signed by Hartford and the company’s corrective action plan can be found at this location on the Department’s website, http://www.dfs.ny.gov/about/stip/Hartford_stip_2012-0042-S.pdf.