:: Conseco Comes To Terms With State Regulators

Acting Insurance Commissioner Joel Ario today announced a 40-state settlement with Conseco Inc., which was necessary due to a pattern of consumer harm in the company’s long-term care insurance business. The Pennsylvania Insurance Department led the multi-state investigation, which resulted in a $2.3 million fine and an additional $30 million in claims-handling improvements and restitution.

News Release, COMMONWEALTH OF PENNSYLVANIA, Insurance Department

Conseco, Inc. (NYSE: CNO) issued a press release that announced a settlement among state insurance regulators and two of its insurance subsidiaries: Conseco Senior Health Insurance (CSHI) Company and Bankers Life and Casualty Company. The settlement concludes a multistate market conduct examination led by Pennsylvania, Illinois, Indiana, Texas and Florida related to long-term care claims practices and procedures, complaint handling, and sales and marketing practices.

The Pennsylvania Insurance Department press release provides the details of the findings and settlement terms.
The on-site examination showed that:

  • Investigation of pending claims were not handled in a timely manner;
  • Claim files were not properly documented or maintained; and
  • Time frames for company responses to claimants did not adhere to applicable regulations.

The full report is available here.

The multi-state examination was coordinated with the National Association of Insurance Commissioners’ (NAIC) market analysis working group and was conducted on behalf of more than 40 participating states under the leadership of Pennsylvania with the active involvement of Florida, Illinois, Indiana and Texas. The NAIC statement appears here.

State Auditor John Morrison, who chairs the NAIC Market Regulation and Consumer Affairs Committee, stated “Consumers need to have confidence in the insurance products they’re buying and in the companies they’re doing business with . . . As state insurance regulators, our No. 1 job is to protect consumers by making sure companies pay claims in a prompt and appropriate manner — and to take regulatory action when they fail to do so.”

Note: The NAIC continues to exercise a substantial leadership role in the oversight of market conduct by insurers as this settlement demonstrates.

Future Of State-Based Regulation – These regulatory efforts come at a time when a substantial lobby proposes the undoing of state-based regulation.

From The NAIC website:

KANSAS CITY, Mo. (April 29, 2008) — The National Association of Insurance Commissioners (NAIC) recognizes the National Conference of State Legislatures (NCSL) for their commitment to state-based insurance regulation and important consumer-protection measures.

At their Spring Forum, NCSL members approved adoption of the Resolution in Opposition to S. 40/H.R. 3200 – the National Insurance Act of 2007. The resolution opposes the National Insurance Act, as well as any other such federal legislation that would threaten the power of state legislatures, governors, insurance regulators and attorneys general to oversee, regulate and investigate the business of insurance.

“State legislators and regulators want to set the record straight,” said NAIC President and Kansas Insurance Commissioner Sandy Praeger. “We provide local, proven consumer protection. And, by working together, we have continued to improve, enhance and modernize the state-based system of insurance regulation.”

Also during the Spring Forum, NCSL renewed two policy statements designed to protect consumers. “Insurance Fraud: Federal Criminalization” supports federal criminalization of insurance fraud, but maintains that prosecution should remain within the jurisdiction of the states. “Equal Access to FBI Criminal History Records” supports state insurance regulator access to the FBI criminal database information consistent with other federal and state financial regulators.

Supporters Of National Insurance Act – The following groups have expressed support for the National Insurance Act:

the Agents for Change, the American Bankers Association, the American Bankers Insurance Association, the American Council of Life Insurers, the American Insurance Association, the Council of Insurance Agents and Brokers, the Financial Services Forum, the Financial Services Roundtable, the Life Insurers Council, the National Association of Independent Life Brokerage Agencies, and the Reinsurance Association of America. (from Sen. Sununu’s website)

Sen. Tim Johnson [D-SD] is a co-sponsor of the proposed legislation.

Another Rube Goldberg Design? – As with ERISA, the issue of state versus federal regulation divides policymakers along uneven lines. As one may read on the BNA Pension & Benefit blog, from the pen of those who ought to know (they were there), such as Steve Sacher, you can get odd outcomes when you bring the lobbyists together to aim your federal statutes at targets of reform. With ERISA it took “progressives” to identify the reform goals and stir enthusiasm, and then the business and labor lobbyists to trade tactical advantages for the needed votes. From this convergence, we have our comprehensive and reticulated statute. In the next election cycle, we may see another venture along these lines. The consumer will be the loser, however, if the notion of reform takes the NAIC and its constituent regulators out of the final design.