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Insurance Department marks milestone with 150th Annual Report; Superintendent says consumer protection focus strong argument for continued state insurance regulation

Insurance companies refunded or credited more than $217 million to New Yorkers over the past two years and paid $18 in million in fines during that period, Insurance Superintendent Eric Dinallo said today as he submitted the 2008 Annual Report of the Superintendent to the Legislature. The fines and refunds were among the consumer protection measures Dinallo highlighted as he presented the historic report.

That amount does not include $2 billion recovered for policyholders affected by the destruction of the World Trade Center in the largest regulatory settlement ever reached in New York State. Also not included is $2 billion negotiated for SCA/XL policyholders by the Department.

The 2008 Annual Report is the 150th such report issued by the Department, which was established by the Legislature in 1859 and is believed to be the oldest independent regulatory agency in the United States.

“We are here to protect policyholders,” Dinallo, who was nominated as Superintendent in January 2007, said. “Consumer protection has been at the heart of the Insurance Department’s mission since William Barnes was named the first Superintendent 150 years ago. A century and a half after its founding, the Department’s commitment to consumers is unsurpassed. As these numbers note, while our daily work for consumers may not make the front pages, it is just as important as what we have done to keep the industry vital during these difficult times.”

Dinallo listed several consumer protection efforts undertaken during his tenure, including:

  • Reducing requested rate increases to auto insurance policyholders by $515 million by instructing insurers to adjust their rates to take into account the effect of higher gas prices on driving habits;
  • The creation of a Senior Protection Unit to focus on the needs of this vulnerable population;
  • The establishment of a Bureau of Community Affairs to provide active outreach and insurance education throughout the State;
  • Ordering that more than 55,000 coastal homeowners whose insurance was wrongly non-renewed be allowed to renew their policies, if they so chose. Changes to state law made it easier for coastal homeowners to get more comprehensive insurance coverage from the New York Property Insurance Underwriting Association and the Coastal Market Assistance Program;
  • Requiring service contract providers to increase their reserves to help ensure their New York customers would be able to get the warranty coverage they paid for. This meant, for example, increasing the reserves for some companies from approximately $1 million to $19 million; and
  • Requiring insurers to treat legally married couples of the same sex the same as all other legally married couples.

Enforcement actions for consumer protection resulted in fines, refunds, license revocations and other disciplinary activity, including:

  • Life insurers refunded or credited policyholders more than $60 million for various violations;
  • Life insurers paid more than $9 million in fines and penalties for these violations;
  • Health insurers were ordered to refund more than $58 million to consumers in the individual and small business markets after failing to pay out in claims the percentage of premiums required by law;
  • Twenty-nine health insurers were fined a total of $1.65 million for violations of state laws requiring prompt payment to consumers and providers;
  • Health insurers paid another $1.8 million in fines for various violations;
  • $36.5 million resulted from Frauds investigations including almost $22.9 million in court-ordered restitution, $2.2 million in penalties, $10 million in refunds to New York State and an estimated industry savings of $1.5 million;
  • Property and casualty insurers were fined more than $1.3 million and ordered to refund more than $1 million to policyholders;
  • Complaint investigations by the Consumer Services Bureau led to almost 250 licenses being revoked or surrendered by agents or brokers, and 1,330 companies, agents or brokers being fined a total of $1.8 million; and
  • Recoveries for consumers after complaints to the Consumer Services Bureau averaged more than $2.3 million per month, for an estimated total of $65 million over 28 months.

“Especially in this difficult economy, we will keep working to make sure New Yorkers get the protection they deserve,” Dinallo said, noting the Department has a number of upcoming regulatory and legislative initiatives both small and large, including:

  • Proposing the implementation of a fee schedule for acupuncture services performed by licensed acupuncturists to their patients under the no-fault automobile insurance system. This should reduce the number of disputes between insurers and licensed acupuncturists, resulting in more uniform, efficient and cost effective processing and payment of no-fault claims. The establishment of the acupuncture fee schedule will also reduce the number of no-fault disputes that are adjudicated in arbitration and court.
  • Proposing a rule that will increase the number of circumstances in which insurers can waive the mandatory inspection of vehicles. The proposed rule will keep in place the requirement that vehicles that should be inspected in order to combat fraud but will enable insurers to waive the inspections when applicable thereby alleviating the cost and burden to both insurers and consumers.
  • Proposing that the life settlement market, in which consumers who no longer need or want their life policies can sell them to a third party, be regulated so consumers have the necessary critical information to make decisions relating to life settlements, and have privacy protections and other safeguards in a life settlement transaction.
  • Working to increase broker compensation transparency, so consumers will be fully informed as they make the important and often necessary decision to purchase an insurance policy.
  • For years, certain health care providers have abused the no-fault insurance system, and such abuse costs no-fault insurers tens if not hundreds of million of dollars, which insurers ultimately pass on to New York consumers in the form of higher insurance premiums. According to the Insurance Information Institute, New York consumers are paying $1.2 million a day because of no-fault insurance fraud. To address this problem, several weeks ago the legislature introduced a new joint Insurance Department and Health Department bill that will permit the Superintendent to prohibit a health care provider from demanding or requesting payment of health services under the no-fault insurance system for a period not exceeding three years if the Superintendent determines that the health care provider has engaged in certain improper activities.

The Annual Report documents the Insurance Department’s activities, including its work to protect bond insurance policyholders and help to avert the collapse of American Insurance Group (AIG) as the most serious economic crisis since the Great Depression unfolded in 2008. The Report also describes Dinallo’s leadership role in urging the continued regulation of insurance by the states.

“State insurance regulators serve a vital and relevant role in overseeing and fostering a vibrant, well-functioning and competitive insurance marketplace with strong state-based consumer protections. This coordinated, national system of state-based insurance supervision continues to meet the needs of the modern financial marketplace while effectively protecting individual and commercial policyholders,” Dinallo said.

Other highlights of the report included:

  • The Department’s Life Bureau supervised 510 organizations in 2008, including 133 life insurance companies licensed to transact business in New York with assets of $2.54 trillion.
  • Net premiums written in 2007 by 803 New York-licensed property and casualty insurers totaled $317.5 billion.
  • The Department’s Health Bureau regulated 97 insurers, health maintenance organizations (HMOs) and other managed care organizations, and reported that 29 accident and health insurers wrote net premiums of $13.9 billion.
  • There were 755 arrests by the Department’s Frauds Bureau in 2008, the highest number since 2004. No-fault frauds arrests in 2008 were up 52% year over year to 154.

The complete report is available on the Insurance Department’s website,


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