Filings Made Easy for Life, Health and Licensing

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Filings Made Easy for Life, Health and Licensing
Enforcement Hot Topics
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The Departments Regulatory Authority

• Pursuant to Tex. Ins. Code Ann. 31.002, TDI
  must
• Regulate the business of insurance in Texas
• Ensure the Texas Insurance Code and other laws
  regarding insurance and insurance companies are
  executed.

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Unauthorized Insurance

• A person, including an insurer, may not directly
  or indirectly do an act that constitutes the
  business of insuranceexcept as authorized by
  statute.
• TEX. INS. CODE ANN. 101.102

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How does TDI learn of violations of the insurance
code or agent misconduct?

• Complaints
• Consumer
• Agent
• Company
• Anonymous
• Internal Discovery
• Examination
• Failure to File
• Failure to Respond to TDI Inquiry
• Sister Agency
• Law Enforcement

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Investigations

• The Texas Department of Insurance may investigate
  and make reports regarding alleged violations of
  the insurance code and misconduct on the part of
  agents.
• TEX. INS. CODE ANN. 4001.007

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What area of TDI is responsible for disciplinary
action based upon violations of the insurance
code and misconduct on the part of agents?

• Enforcement Division

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Enforcement Division Teams

• Health, HMO, Life and Viatical
• Licensing
• PC, Windstorm and Fire Marshal
• Rate, Title and Financial

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Organizational Structure
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Pending Enforcement CasesAs of 3/31/2008Total
number of Cases 1347
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Who is subject to the Commissioners Authority?

• Holder of
• Permit
• License
• Certificate of Authority
• Certificate of Registration
• Other Authorization Issued or Existing

AUTHORIZATION
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Additional Regulatory Authority

• TEX. INS. CODE ANN. Chapter 82 applies to
• an individual or
• a corporation, association or partnership
• or other artificial person who is engaged in the
  business of insurance or is regulated by the
  Commissioner

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Business of Insurance

• Making or proposing to make, as an insurer, an
  insurance contract
• Taking or receiving an insurance application
• Receiving or collecting any consideration for
  insurance, including
• a premium
• a commission
• Issuing or delivering an insurance contract
• Directly or indirectly acting as an agent for or
  otherwise representing or assisting an insurer or
  person in
• Soliciting, negotiating, procuring or effecting
  insurance
• Disseminating information relating to coverage or
  rates
• Forwarding an insurance application
• inspecting a risk
• Setting a rate

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Methods of Investigation

• (1) TIC 38.001 Inquiry
• (2) TIC 101.104 Inquiry
• (3) Subpoena
• Witness Statements
• Under Cover

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TEX. INS. CODE ANN. 38.001

• TDI may address a reasonable inquiry to
• any insurance company, including a Lloyds plan
  or reciprocal or interinsurance exchange
• an agent
• or other holder of an authorization
• Relating to
• the persons business condition
• any matter connected with the persons
  transactions that the Department considers
  necessary for the public good or for the proper
  discharge of the Departments duties

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38.001 Inquiry

• Written response due the 10th day after the date
  the inquiry is received

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Can the 10 days be extended?

• Commissioners Bulletin No. B-0040-00
• Grant Extensions Under Appropriate Circumstances
• Written Request for Extension prior to initial 10
  day period
• Specific reason a response cannot be made in
  accordance with 38.001
• Provide date complete response will be submitted

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101.104 Inquiry

• Subject shall IMMEDIATELY provide information to
  the Commissioner

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Subpoena

• The Commissioner may issue a subpoena regarding a
  matter the Commissioner has authority to consider
  or investigate
• TEX. INS. CODE ANN. 36.151 36.152

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What Can Be Subpoenaed?

• Attendance and testimony of a witness
• Production of Records
• Is there a territorial limit on subpoenas?
• Throughout the State of Texas
• TEX. INS. CODE ANN. 36.152

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Sanctions

• Sanctions for violation of or failure to comply
  with a specific provision of the Insurance Code
  or its rules and regulations include
• Cancel, suspend or revoke any permit, license,
  certificate of authority, certificate of
  registration, or other authorization
• Deny an application for an original license
• Probated license suspension
• Order the possessor of such permit, license,
  certificate of authority or certificate of
  registration to
• Cease and desist from the specified activity or
  from failure to comply with the Insurance Code
  and/or its rules and regulations
• Pay an administrative penalty
• Make restitution to all Texas residents, Texas
  insureds, and entities operating in Texas harmed
  by the violation or failure to comply
• A combination of the sanctions.
• TEX. INS. CODE ANN. 82.001, 82.051 - 82.054,
  4005.101, 4005.102, 4005.103, 4005.109.

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Life Health Hot Topics

• Unauthorized Insurance
• Filings Issues and Late Payments
• III. Miscellaneous Compliance Issues
• A. Foreign Group Health Insurers
• B. Internet Advertising
• IV. Life Product Regulation Issues
• A. Premium Financing of Life Insurance
• B. Annuities

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I. Unauthorized InsuranceRationale for
Prohibition

• It is the public policy of this state to protect
  residents against acts by a person or insurer who
  is not authorized to do business in Texas by
• Maintaining fair and honest insurance markets
• Protecting the premium tax revenues of this
  state
• Protecting authorized persons and insurers, who
  are subject to strict regulation, from unfair
  competition by unauthorized persons and insurers
  and
• Protecting against evasion of the Texas insurance
  regulatory laws.
• TEX. INS. CODE ANN. 101.001(b)

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I. Unauthorized InsuranceTypes of Unauthorized
Plans

• Unauthorized Health Plans masquerading as
• ERISA Plans
• Professional Employee Organizations (PEOs)
• Association Plans
• Union Plans
• Discount Plans
• Unauthorized MEWAs
• Medical Sharing
• Surety Brokers

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I. Unauthorized InsuranceWarning Signs and Red
Flags

• Claims of low rate, or offer of minimal or no
  underwriting (plan accepts almost anyone even
  those with pre-existing or serious illnesses).
• Plan claims ERISA preemption or other federal
  regulation (e.g. Union plan), but is marketed by
  agents.
• Product claims to be fully funded, fully
  insured, or reinsured, but agents are not told
  the name of the carrier insuring or underwriting
  the product.
• Sales pitches that avoid insurance terminology
  even though they operate like insurance (e.g.
  reference to consultant fees v. commissions,
  contributions v. premiums, and benefits v.
  insurance).
• Plan name closely resembles the names of
  legitimate companies.
• Bulletins, B-0009-02, B-0032-03,
  B-00080-06 and B-0004-07

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I. Unauthorized InsuranceDuty to Report

• A person who is investigating or adjusting a loss
  or claim is required to immediately report
  unauthorized insurance in Texas. TEX. INS. CODE
  ANN. 101.301(a)
• A person has a duty to report fraudulent
  insurance acts
• In prescribed written format
• Within 30 days
• To the insurance fraud unit or other authorized
  entity.
• TEX. INS. CODE ANN. 701.051 and Bulletin
  B-0046-05
• A person is immunized from liability for
  reporting insurance fraud. TEX INS. CODE ANN.
  701.052 and Chapter 34.

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I. Unauthorized InsuranceHow to Report

• How to report insurance fraud and unauthorized
  plans on the TDI Website
• www.tdi.state.tx.us
• Select reporting fraud link at bottom of home
  page.
• Report online or by toll-free number.
• www.tdi.state.tx.us/commish/alert1.html

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II. Filings Issues and Late PaymentsRationale
and Recent Enforcement Actions

• Late filings and payments are prosecuted to
• Enforce statutory or regulatory deadlines
• Obtain filings information for regulation and
• Address the increased costs associated with
  monitoring filings and payments.
• Recent enforcement actions target
• Independent Review Organizations (IROs) and
• Multiple Employer Welfare Arrangements (MEWAs).

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II. Filings Issues and Late PaymentsPrompt
Payment of Claims - Deadlines

• Physicians and providers have 95 days to submit
  claims.
• TIC 843.337 and 1301.102 and 28 TAC 21.2806
• HMOs and PPBPs must pay
• Paper claims within 45 days
• Electronic claims within 30 days
• Pharmacy claims within 21 days
• TIC 843.338, 843.339, 1301.103 and 1301.104 and
  28 TAC 21.2802(31) definition of statutory
  claims payment period.

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II. Filings Issues and Late PaymentsPrompt
Payment of Claims - Penalties

• If an HMO or insurer does not pay a clean claim
  on or before the date the insurer is required to
  make a determination or adjudication of the
  claim, the insurer shall pay the preferred
  provider making the claim the contracted rate
  owed on the claim plus a penalty in the amount of
  the lesser of
• 50 of the difference between the billed charges,
  as submitted on the claim, and the contracted
  rate or
• 100,000.
• TIC 843.342 and 1301.137 and 28 TEX. ADMIN.
  CODE 21.2807
• Failure to comply with more than 2 of cleans
  claims submitted subjects an HMO or insurer to
  administrative penalties.
• 28 TEX. ADMIN. CODE 21.2822(a)

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II. Filings Issues and Late PaymentsPrompt
Payment of Claims Orders
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II. Miscellaneous Compliance IssuesForeign
Group Health Insurers
Any contract of insurance payable to any citizen
or inhabitant of this State by any insurance
company or corporation doing business in this
State shall be held to be a contract entered into
under and by virtue of the laws of this State
relating to insurance, and governed thereby,
notwithstanding such policy or contract of
insurance may provide that the contract was
executed and the premiums and policy (in case it
becomes a demand) should be payable without this
State, or at the home office of the company or
corporation issuing the same.
TEX. INS. CODE ANN. Article 21.42
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III. Miscellaneous Compliance IssuesForeign
Group Health Insurers - Timeline
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II. Miscellaneous Compliance IssuesForeign
Group Health Insurers
Filing is required . . . an insurer may not use
a document described by TEX. INS. CODE ANN.
1701.002 in this state unless the form of the
document is filed with the Department in
accordance with Chapter 1701. TEX. INS. CODE
ANN 1701.051(a) No later than 60 days before
use . . . the insurer must file the form of the
document not later than the 60th day before the
date the document is used. TEX. INS. CODE ANN
1701.051(b)
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III. Miscellaneous Compliance IssuesInternet
Advertising
A webpage of an insurers Internet website must
include all appropriate disclosures and
information required by applicable rules adopted
by the Commissioner only if the web page
describes specific policies or coverage available
in this state or includes an opportunity for an
individual to apply for coverage or obtain a
quote from an insurer for an insurance policy or
certificate or an evidence of coverage. TEX.
INS. CODE ANN. 541.082(b)(1) and (2) An insurer
issuing an accident and health insurance policy,
or a small or large employer health benefit plan
issuer may establish premium discounts, rebates,
or a reduction in otherwise applicable
co-payments, coinsurance, or deductibles, or any
combination of these incentives, for an insured
who participated in programs promoting disease
prevention, wellness and health. TEX. INS. CODE
ANN. 1201.013(a), 1501.107(a), and 28 TEX.
ADMIN. CODE 21.109
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III. Miscellaneous Compliance IssuesInternet
Advertising
Fast, affordable and reliable  
Every insurer marketing policies in this state
shall establish and maintain a system of control
over the content, form, and method of
dissemination of all advertisements concerning
its policies. 28 TEX. ADMIN. CODE
21.122(d) Insurers must maintain a home office
file of every institutional advertisement and
file a statement of compliance with the
Department. 28 TEX. ADMIN. CODE 21.116 (a) and
(b)
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IV. A. Premium Financing of Life Insurance TDIs
Statutory and Regulatory Authority

• A premium finance agreement is an agreement by
  which an insured or prospective insured promises
  to pay to an insurance premium finance company
  the amount advanced or to be advanced under the
  agreement to an insurer or to an insurance agent
  in payment of premiums on an insurance contract.
  
• TEX. INS. CODE ANN. 651.001(8)
• A Premium Finance License is required when a
  person
• Makes loans by entering into premium finance
  agreements
• Acquires premium finance agreements from
  insurance agents, brokers, or other premium
  finance companies or
• Holds premium finance agreements made and
  delivered by insured payable to the person or his
  order.
• 28 TEX. ADMIN. CODE 25.21(a)

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IV. A. Premium Financing of Life Insurance
Money for Nothing and Policies for Free

• Creation of Future Life Settlements
• Seniors with high net worth are being targeted
  for the sale of large death benefit life
  insurance contracts.
• Agents are offering free insurance, no cost to
  the insured, no collateral required, and free
  money.
• After two years, the contestability period of the
  policy expires and the ability to challenge any
  misrepresentations.

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IV. A. Premium Financing of Life InsuranceHuge
Commissions for Agents

• Agents receive commissions upwards of 1 million
  dollars for selling a 10 million life insurance
  policy.
• This high stake type of compensation may result
  in deceptive sales practices and marketing
  schemes.

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IV. A. Premium Financing of Life InsuranceThe
Application

• Insurance companies will not issue policies
  intended for sale in the secondary market.
• Questions are designed to determine if policy is
  intended for sale.
• Misrepresentations are being made in order get
  policies issued.

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IV. A. Premium Financing of Life InsuranceLife
Insurance Death Benefits

• Death benefits are only paid on a small
  percentage of life insurance policies.
• The rest of the policies are surrendered or
  lapse.
• Investors are buying these policies.
• Payment of large death benefits may increase
  rates, which harms consumers and the insurance
  market.

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IV. B. AnnuitiesDefinitions and suitability

• What is an annuity? A fixed, variable, or
  modified guaranteed annuity that is individually
  solicited, whether classified as an individual or
  group annuity.
• TEX. INS. CODE ANN. 1115.002(2)
• What types of annuities are there? Fixed,
  variable, or modified guaranteed annuities.
• TEX. INS. CODE ANN. 1115.002(2)
• What does suitability mean? -Reasonable grounds
  exist based upon a consumers financial status,
  tax status, and investment objectives for an
  agent or insurer to recommend the purchase of an
  annuity.
• TEX. INS. CODE ANN. 1115.051(a) and (b)
• What is the Departments Enforcement Power Over
  Annuities?
• TEX. INS. CODE ANN. Chapter 1115, Subchapter C

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IV. B. AnnuitiesRegulations

• NAIC Suitability in Annuity Transactions Model
  Regulation
• Reasonable grounds that recommendation is
  suitable based upon the consumers (1) financial
  status (2) tax status and (3) investment
  objectives.
• Many states have adopted components of this Model
  Annuity regulation to some extent, including
  Texas.

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IV. B. AnnuitiesMarketing Issues

• Why sell annuities to seniors?
• How are they being sold? Free lunch or free
  dinner seminars which offer financial planning,
  estate planning, and living trusts. There are
  also events for seniors in nursing homes.
• What may be wrong with selling an annuity to a
  senior citizen?
• Bulletin B-0054-07

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IV. B. AnnuitiesReplacements

• What is a replacement? The purchase of a life
  insurance policy or annuity contract that
  involves discontinuing or changing an existing
  policy or contract, including financed purchases.
  TEX. INS. CODE ANN. 1114.002(8)
• What is the Consumer Notice is required?
  REPLACEMENT OF LIFE INSURANCE OR ANNUITIES
  Disclosure of acquisition costs, surrender costs
  and whether replacement is in the consumers best
  interests. TEX. INS. CODE ANN. 1114.006 and
  1114.051 and 28 TEX. ADMIN. CODE Chapter 3,
  Subchapter NN
• What is the Departments Enforcement Power over
  Annuity Replacements? (license revocation,
  administrative penalties, forfeiture of
  commissions, restitution, restoration of policy
  or contract values, and payment of interest)
  TEX. INS. CODE ANN. Chapter 1114, Subchapter C

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Links to Resources

• This presentation has compiled information from
  the following resources including
• United States Department of Labor (DOL),
  www.dol.gov.
• National Association of Insurance Commissioners
  (NAIC), www.naic.org
• Texas Department of Insurance (TDI/Department),
  www.tdi.state.tx.us
• Texas Legislature Online, www.capitol.state.tx.us
• Texas Secretary of State, www.sos.state.tx.us
• Wolters Kluwer Financial Services, NILS
  INsource, http//insource.nils.com
• Password Protected