On the Home Front in Connecticut

State legislators across the country are beginning to formulate proposed bills for consideration by their fellow solons. In CT, rising like a phoenix from the ashes, is another proposal to prohibit offsetting LTD benefits by the amount of dependent Social Security payments. There is a similar proposal to bar LTD offsets for pension benefits received. Similar Social Security offset bills were defeated in the last couple CT legislative sessions, though a fairly rigorous disclosure requirement bill was passed. If approved, these offset proposals would result in rising LTD premium costs and probably lead to more employers dropping their LTD programs or passing along more of the cost to employees.

I also see in my local paper (I’ll admit it, I’m a holdout for the black newsprint with my morning coffee) that CT’s newly elected Governor Malloy supports a paid sick leave bill that was defeated in the CT legislature last session. The proposal would require employers to grant employees up to five paid sick days per year. While the duration of the bill’s benefits are not on the same scale as the state-mandated STD programs in CA, HI, NJ, NY, PR and RI, supporters nonetheless claim it would be the first state-mandated sick leave program in the nation.

Texas Publishes New Rule on Discretionary Clauses

On the heels of the recent notice from insurance authorities in the District of Columbia advising that they will not approve forms containing discretionary clauses, the Texas Department of Insurance on December 7th published adopted rules similarly prohibiting the use of discretionary clauses in insurance policy forms.

The news from TX capped a rule-making process that had been in motion since early in 2010. While industry representatives provided testimony at the public hearings that were held on this issue, their input failed to stem the rising tide of state insurance department opposition on this issue.

The regulatory drum on the issue of discretionary clauses continues to beat steady and loud. The shoe that some industry observers expect to drop next is a big one – NY has been silent on this issue since April, when it issued a draft regulation prohibiting discretionary clauses in NY policies.

DC Bulletin on Discretionary Authority

The District of Columbia Department of Insurance last week issued a formal Notice to insurers advising that policies containing discretionary clauses “will be examined to determine if any discretionary clauses can be used improperly to deny claims or to restrict any rights an insured has under the policy which is otherwise properly payable…”

The Notice cites the following language as an example of a discretionary clause:

“We have full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions of the policy.”

While there are no specific prohibitions on this sort of policy language in the DC insurance code or regulations, the Notice advises that the “Department does prohibit Sole Discretionary language and other types of discretionary clauses in policy forms, and will request changes to the policy form.”

New SERFF Requirement in Connecticut

In one of his last official acts, outgoing CT Insurance Commissioner Thomas Sullivan signed Connecticut Bulletin IC-26 mandating use of SERFF for all form, rate or rule filings made on or after January 1, 2011. The bulletin states that paper filings received after that date will be rejected.

State Insurance Department Updates

On the heels of our last post regarding Alaska’s reinstatement of its “filing for prior approval” requirement, here’s some other recent insurance department news on the state filing front:

Arkansas issued Bulletin No. 9-2010 dated November 2nd to advise that SERFF and EFT will be required for rate and form filings effective March 1, 2011….Connecticut alerted the industry informally this week that it will be releasing a bulletin soon to implement a SERFF requirement as of some yet to be determined effective date…. Delaware released Forms and Rates Bulletin No. 33 informing insurers that the department will only accept EFT for payment of fees in connection with rate, form, rule and advertisement filings.

Also, Michigan continues to work with trade groups to refine requirements for its anticipated data call for policies sold since January 1, 2000. And Alaska issued Bulletin B-10-07 on October 28th requesting that insurers provide an updated general email address specifically for the purpose of receiving email notifications from the department, to avoid situations where notification emails from the department are returned as undeliverable due to staffing changes at insurers.

Alaska to Require New Filing Approvals

The Alaska Division of Insurance issued Bulletin B 10-08 recently to provide notice of Order R10-04 repealing the exemption of certain products, including disability, from filing and approval requirements. Beginning January 1, 2011, all new or revised forms must be filed for prior approval by Alaska. Forms not filed prior to January 1, 2011 are not required to be filed for approval unless they are amended.

Alaska now joins Michigan in the ranks of states that have rescinded relatively long standing exemptions from filing and approval requirements in 2010. As the Massachusetts Insurance Division collects survey data from disability insurers, it will be interesting to see what may come of their exemption for the filing of group disability forms for approval as well.

Delaware - EFT Required for SERFF Filings Starting November 1

On September 27th, the Delaware Insurance Department issued Bulletin No. 33 requiring use of Electronic Funds Transfers (EFT) for rate, form, rule and advertisement filings that are submitted using the System for Electronic Rate and Form Filings (SERFF). The new EFT requirement is effective November 1, 2010.