Setting the Agenda: Insurance and Financial Services [CORRECTED]

Insurance issues don’t often make it into the spotlight, but they can have a significant impact on the pocketbook.

This year lawmakers passed bills that could lower student health-insurance rates, ensure life-insurance beneficiaries get their checks and encourage New Yorkers to protect themselves in accidents involving uninsured motorists.

One bill requires insurers to track down beneficiaries of life-insurance policies. Even though they use Social Security death listings to stop paying on annuities, insurers haven’t had to pay out on life-insurance policies unless they hear from beneficiaries, who may not even know of the existence of such a policy.

“They would use this to say, ‘Well, wait a sec, this person has died, so let’s stop sending the checks,’ ” said Assemblyman Joseph Morelle, who chairs the Assembly Insurance Committee. “But interestingly enough, those same insurers didn’t use that information to pay out claims to people who died who had life-insurance policies.”

Other legislation addresses supplemental insurance, which protects people injured by uninsured or underinsured motorists. One bill encourages people to have more coverage by switching from an opt-in to an opt-out system, and another one expands the coverage for first responders so they’re covered when they are outside an emergency vehicle, not just while they are inside it.

Lawmakers also touted a higher-education bill that allows large universities to self-insure their students for the first time, which could lower rates.

Looking to next year, both Morelle and Sen. James Seward, the chair of Senate Insurance Committee, said that they would look at ways to combat no-fault insurance fraud.

“It continues to be a concern and a top issue that we need to deal with, because New Yorkers—particularly in the metropolitan area but statewide [as well]—everyone is paying more than they need to for their auto insurance because of no-fault fraud,” Seward said. “The Senate has passed bills year after year. We do need a partner in the Assembly, and we hope we’ll there one day.”

Seward said he’d like to make staging an accident a crime and make it a felony to run the patients through medical mills, a process that allows them to collect and share the $50,000 in no-fault benefits.

Another area Seward said he’ll focus on is force-placed insurance, which banks can purchase for a homeowner and add to a mortgage if the bank determines the coverage is inadequate.

“The concern is that there’s not oversight or regulation of this practice, and there’s no notice requirement, and homeowners are usually quite surprised to see their mortgage payment increase as a result, sometimes quite dramatically,” Seward said. “And there’s also no opportunity given to the homeowners to purchase their own additional coverage, usually at a far less expensive amount.”

Morelle said he’d also like to have more transparency for patients regarding out-of-network health care, which can add thousands of dollars to a medical bill without the patient’s knowledge.

And finally, Morelle said he’ll be pushing to enact a state law to implement a state health-care exchange, even though the process was launched by an executive order.

“In my view, there are too many public policy issues that need to be addressed to simply be done by a single individual,” Morelle said. “This really ought to be subject to an agreement between the governor and the Legislature, as we did last year, but unfortunately the Senate essentially reneged and as a result couldn’t get an agreement passed.”

What Got Done in 2012:
Self-insuring at large universities
Notification of life-insurance beneficiaries
Encouraging and expanding supplemental insurance

What’s on the Agenda:
Legislation to create a health-insurance exchange
Tackling fraud in no-fault insurance
Transparency of out-of-network health care
Force-placed insurance reform
Expand excess-lines insurance

INSIGHT
New York Insurance Association
By Ellen Melchionni
President
We applaud Gov. Cuomo for his efforts to reduce state spending. Unfortunately, he has continued the nefarious practice of hijacking funds intended to regulate the insurance industry and using these funds for totally unrelated purposes. Taxes and fees to the government are involuntary payments to ensure essential government services are provided. When the government imposes a tax on one group of persons or businesses to pay for a specific service (such as a fishing license), it is commonly understood that the money received from such a tax should only be used to pay for the costs of regulating that service. However, this basic concept has been violated by the state for over 20 years by requiring domestic New York insurance companies to fund state programs that are not related to regulating insurance.

In this year’s budget the state assessed the insurance industry $428 million, of which a mere 30 percent is being properly used to cover the expenses of the department as the law requires. In stark contrast, the remaining 70 percent, or $305 million, is being used to fund other state agencies in suballocations for programs unrelated to insurance. The assessments on the insurance industry have increased at an alarming rate over the past few years. Since 2008 the assessments have nearly doubled and the suballocations have nearly tripled.

We call on the governor to make good on his word and make New York a more attractive place to do business. Eliminating this practice will mean the governor does not just talk the talk on making New York business-friendly but actually walks the walk.

Property Casualty Insurers Association of America
BY Kristina Baldwin
Assistant Vice President
Reducing the rampant fraud that is plaguing New York’s no-fault auto insurance system will continue to be a top priority for the Property Casualty Insurers Association of America (PCI) in the 2013 legislative session. No-fault fraud adds hundreds of millions of dollars each year to the auto insurance premiums of New York drivers, and changes to the laws need to be made to get tough on no-fault fraud. Specifically, we need to get laws on the books to give insurers adequate time to investigate fraud, provide for the prompt and fair resolution of no-fault disputes, and close the medical mills by putting a stop to fraudulent and unnecessary medical treatments. PCI looks forward to working with Gov. Cuomo, the Legislature and the Department of Financial Services in 2013 to continue efforts to reform New York’s no-fault system and reduce no-fault fraud.

In the upcoming legislative session PCI will also be working to build on legislation that was enacted in 2011 to modernize the regulation of commercial insurance. The 2011 legislation provides some freedom from rate and form regulation for policies sold to large businesses. Large businesses often have unique insurance needs that cannot be met through standard insurance policies, and the 2011 commercial modernization law was intended to allow businesses to secure these unique policies from New York licensed insurers in a more time-efficient and cost-efficient manner. The 2011 law is also consumer-oriented because it allows businesses to meet their insurance needs through policies that are subject to the guaranty fund and the protections of New York law. These important regulatory modernization provisions are scheduled to expire in June of 2013, and PCI will be working to make these provisions permanent and improve certain aspects of the law so that more businesses will be able to benefit from the law’s provisions.

CORRECTION:

An earlier version of this story referred to an auto insurance bill and incorrectly said that it encourages people to have more coverage by switching from an opt-out to an opt-in system. In fact, the switch is from an opt-in to an opt-out system.