At a Glance
THOMAS R. SULLIVAN, Commissioner
Office of the Insurance Commissioner Established – 1865
Insurance Department Established – 1871
Statutory authority – CGS Title 38a
Mailing address – P.O. Box 816
Hartford, CT 06142-0816
Central office – 153 Market Street,
Hartford, CT 06103
Number of employees – 149
Recurring operating expenses – $22,644,727.00
Organizational structure – Administrative Division; Consumer Services Division; Financial Regulation Division; Legal Division; Licensing Division; Life and Health Division; and Property and Casualty Division.
mission of the Connecticut Insurance Department is to serve consumers in a
professional and timely manner by providing assistance and information to the
public and to policy makers, by regulating the insurance industry in a fair and
efficient manner which promotes a competitive and financially sound insurance
market for consumers, and by enforcing the insurance laws to ensure that
consumers are treated fairly and are protected from unfair practices.
The insurance laws administered by the Insurance Department are set forth in Title 38a of the Connecticut General Statutes. They are divided into 28 chapters, each addressing a separate area of insurance regulation and insurance-related entities and products.
The Consumer Services Division consists of the Consumer Affairs Unit, the Market Conduct Unit and the recently combined Fraud Investigative and Compliance Unit. The Division maintains an active outreach program to properly inform and educate consumers on insurance matters. The outreach program focused on senior groups, small business owners, health fairs, and medical providers. During fiscal year 2008-2009, outreach programs continued to include military personnel by including presentations held at the U.S. Naval Submarine Base in New London, as well as the addition of our website pages dedicated to the unique insurance needs of military personnel. The Division continued educational efforts with “Insure U”, an education program for consumers hosted on the website, and informed consumers of this tool during various outreach programs.
The Consumer Affairs Unit receives, reviews, and responds to complaints and inquiries from Connecticut residents concerning insurance-related problems, and serves as a mediator in claim disputes to determine if statutory requirements and contractual obligations within the Commissioner’s jurisdiction have been met. During fiscal year 2008 - 2009, the unit responded to almost 6,350 formal complaints, handled over 27,750 phone calls, and provided consumer education through distribution of over 811 informational pamphlets and booklets. As a direct result of this Unit’s involvement, $2,481,078 was recovered by Connecticut consumers during the fiscal year.
The Market Conduct Unit conducts on-site examinations of insurers’ and licensed producers’ books and records as they relate to coverage written for Connecticut citizens and commercial enterprises. Additionally, the unit monitors the conduct of medical utilization review companies to ensure that they operate in compliance with the Managed Care Act and other applicable statutes and regulations.
The Fraud Licensee Investigative and Compliance Unit receives complaints alleging fraud committed against insurers, individual licensees (agents), as well as health plans, and, as appropriate, refers such allegations for criminal investigation or for regulatory or civil action. It also handles the licensing and investigation of Bail Bonds activity, Medical Discount Plans, Pharmacy Benefit Managers, Preferred Provider Networks and Viatical Insurers for compliance with our statutes, while issuing licenses and registrations to conduct these businesses where warranted. This Unit facilitates the efforts of the insurance industry, law enforcement, and federal or state officials in the investigation and prosecution of insurance fraud committed in Connecticut.
The Licensing Division is responsible for licensing professionals to ensure the quality and integrity of individuals and organizations in Connecticut, which sell insurance products, provide insurance consulting services, and adjust insurance claims. The Licensing Division meets this benchmark by developing and maintaining up-to-date standards and educational programs for all licensees.
The Financial Regulation Division monitors the financial condition of domestic and foreign insurance companies, health care centers and fraternal benefit societies authorized to do business in Connecticut. The analysis and compliance staff accesses financial information directly from the National Association of Insurance Commissioners’ (NAIC) database and, in many instances, the field examination staff can electronically access company data files to perform substantive testing. The Division has a priority-based/ risk based approach to analysis and examination designed to provide timely identification of potential solvency concerns, and facilitate earlier regulatory intervention.
The Legal Division directs the receivership and guaranty fund activities of the Insurance Department, and provides legal advice and related services to the Commissioner and the seven divisions of the Insurance Department on a broad spectrum of issues that arise in regulating the insurance industry. The legal staff also drafts, monitors, and analyzes legislation; drafts and promulgates regulations; and, participates in department hearings involving rates, license enforcement, and acquisitions of domestic insurance companies.
The Life and Health Division reviews policy form and rate filings for all life and health insurance products to ensure compliance with Connecticut General Statutes and regulations. The Division oversees statutory requirements for managed care organizations, licenses utilization review companies, and publishes a managed care report card. It also publishes lists of carriers offering Medicare supplement, long-term care, small employer group health, individual health, and Health Management Organization (HMO) policies. The Division provides technical assistance to other divisions, agencies, and the Legislature; promulgates regulations; and takes enforcement action against carriers regarding non-compliance issues.
The primary responsibility of the Property and Casualty Division is to examine property and casualty insurance rates, rules, policy forms, and underwriting guidelines to ensure that the insurance products sold in Connecticut by licensed carriers comply with Connecticut statutory requirements. This is accomplished through review, analysis, oversight, and approval of insurance company programs covering home and automobile insurance; business property and liability; medical, legal, and other professional liability; and workers’ compensation insurance. The Division also oversees the operation of assigned risk plans for automobile, property, and workers’ compensation insurance.
Actuarial staff is currently assigned within the various divisions to ensure that actuarial input is provided to various department functions and procedures. The actuarial staff participates in the analysis of the financial statements and other statutorily required information. Actuaries also participate in on-site examinations of insurance companies. The actuaries are responsible for examining the rates filed for all life, health, and property/casualty insurance companies to ensure compliance with Connecticut statutory requirements.
The Administration Division consists of the Department’s Legal Division, Business Services Office, Computer Systems Support, Human Resources/Affirmative Action and the Public Affairs Unit.
The Insurance Department committed to improving communications with the consumer, during the fiscal year 2008-2009. A key objective in accomplishing this goal was to redesign the Department website, making it more consumer-focused. The new website, launched in February 2008, is a success and provides consumers with information they need to make informed insurance decisions.
During fiscal year 2008-2009, Consumer Affairs (CA) Unit staff worked with the Centers for Medicare and Medicaid Services (CMS) to share agent complaint information from seniors regarding agent misrepresentation and inappropriate marketing practices, related to Medicare Advantage cases. CA staff and CMS met with individuals from the CT CHOICES program on how to further facilitate information sharing and better protect seniors from predatory sales practices.
The Consumer Affairs Unit completed a comprehensive review of its work processes with an outside vendor. Steps have begun to redesign processes and better serve the Insurance needs of Connecticut residents. Changes have been implemented to make submitting complaints and questions to the Department easier. One of the first items was a new Brochure to advise the public of how we can be of service and how to submit questions or complaints. An “Ask the Commissioner” feature was added to the department website which allows questions to be submitted for responses primarily by CA staff. Final testing is nearing completion for an online complaint submission feature where the complaints are entered directly into our CRIS (Connecticut Regulatory Information System) system. This not only makes complaint submission easier for consumers but speeds response time, reduces handling and mailing charges as all correspondence between the individual, the department and the insurance company/ producer/adjuster can be handled electronically.
The Consumer Services Divisions outreach program educated the community on insurance matters, reviewed complaint files involving medical necessity, and represented the Insurance Department on a number of committees. The outreach programs assisted consumers in getting the proper information to make timely and informed decisions on what coverage would best meet their needs. The Consumer Affairs unit continues to perform quarterly outreaches at the Groton Submarine Base to educate military personnel on Insurance issues. A series of outreaches throughout the state were performed specifically on the dependent age change for health insurance coverage enacted under Public Act 08-147.
The Consumer Affairs Unit responded to the financial crisis in several ways; responding to written and telephonic concerns about the financial stability of many Insurance companies and educating consumers on the protection afforded to them by the Connecticut Guaranty Association. The Department, at the Governor’s request, co-hosted Financial Forums across the state with the Department of Banking to discuss the issues facing the insurance and banking industries and tools available to consumers to help them with their questions and concerns.
The Consumer Affairs unit has completed a Memorandum of Understanding with the UCONN Health Center to assist the department with the medical issues that arise in the investigation of consumer complaints as well as to assist in ensuring that the External Appeal program is properly being carried out by contract vendors.
During fiscal year 2008-2009, enhancements to the computer system continued. Changes were implemented to put the Department’s External Appeal process on the system, significantly reducing turnaround times, copying and mailing costs. Documentation is now sent electronically between the Department, the Insurance Companies and the External Appeal vendors.
The Market Conduct Unit activities recovered $1,363,936 in fines as a result of comprehensive Market Conduct examinations and investigations and utilization review surveys, during the 2008-2009 fiscal year. In addition, the Unit Recovered $745,000 in fines as a result of utilization review and Market Conduct examination surveys for the same reporting period.
The Licensing Division implemented online application capability for Resident Producers, Casualty Claim Adjusters, Certified Insurance Consultants, Life Settlement Brokers, Motor Vehicle Physical Damage Appraisers, Public Insurance Adjusters, Reinsurance Intermediary Brokers and Managers, as well as Surplus Line Brokers. Additionally, Licensing implemented an online program for licensees to verify, as well as change/update certain license information such as address, telephone number, business affiliation and more. Effective October 1, 2008, pursuant to Public Act 08-175 An Act Concerning Life Settlements, the Division transitioned from a Viatical Settlement Broker to a Life Settlement Broker license in conformity with NAIC standards. All programs were designed and implemented with the following goals of “…conserving, protecting and improving the natural resources and environment of the state…” while at the same time enabling more efficient and accurate processing of licenses, and subsequent changes/updates, with the ultimate goal of increased customer satisfaction for 140,000+ licensees, insurers, and members of the public.
The Financial Regulation Division successfully passed the NAIC accreditation review during February 2009. The Agency was awarded the maximum 5 year accreditation award.
Also, The Financial Analysis Unit completed review and approval of seven acquisitions of control of Connecticut domiciled insurers,
Due to the distressed market conditions increased monitoring of domestic life companies occurred within the Financial Analysis Unit. Throughout the year, the Financial Analysis Unit actively supervised one financially distressed Connecticut domestic insurer, keeping them on track and solvent.
The Legal Division, during Fiscal Year 2008-2009, promulgated nine regulations and assisted Department divisions in 64 administrative enforcement proceedings or stipulated settlements that resulted in the assessment of $2,136,399 in fines and penalties. The Division also supported 33 insurance rate hearings and participated in two hearings under the Connecticut Insurance Holding Act regarding the merger or acquisition of control of a Connecticut domiciled insurer.
In October 2008, the Life and Health Division published the annual managed care report card, A Comparison of Managed Care Organizations in Connecticut. The Life and Health Division received 3,168 submissions and processed approximately 10,000 rate and form filings, including electronic submissions through the System for Electronic Rates and Form Filings. In addition, licenses were issued or renewed to 114 utilization review companies.
The Property and Casualty (P&C) Division received over 4,400 insurance program filings of rates, rules, and forms in fiscal year 2008-2009. The Division continues to assess its processes to develop efficient handling of filings and has improved communication with filers to assure higher quality submissions.
In July of 2008, the Division completed work on the Coastal Market Assistance Plan (C-MAP), as required under Public Act 05-275. This plan has been operational for a year through the FAIR Plan and since its implementation, the FAIR plan has been quoting business but has not issued any policies. This is a good indicator that competition is working in the state as consumers are able to obtain coverage for their homes in the existing markets.
The Division completed work with the Computer Systems Support Unit to develop a new “Web-based” medical malpractice reporting tool. This tool now enables companies and hospitals to report closed claims directly to the departments’ data base and has been deemed a success by those who file with the Department.
In 2008, the Insurance Department implemented a filing review exemption procedure for certain types of commercial risk filings from the form, rate, and rule filing provisions of CGS 38a-676. Filings are implemented on a ‘file and use’ basis and subject to an audit at a later date.
Information Reported as Required by State Statute
As reported by the Financial Regulation Division, as of July 1, 2008, there were 1,214 insurance companies licensed in Connecticut. Of that total, 116 were domiciled in the state of Connecticut. The Financial Regulation Division reviewed the applications of 49 insurers applying for licensure during the fiscal year. Of the 49 applications reviewed, 34 were licensed and 15 were rejected and/or withdrawn. In addition, 14 companies ceased to be licensed through dissolution, merger, or voluntary surrender of their certificates of authority. As of June 30, 2009, there were 1,234 insurance companies licensed and authorized to transact business in Connecticut.
During fiscal year 2008-2009, 27 on-site examinations of Connecticut domiciled insurers were completed. As of June 30, 2009, there were 5 examinations in progress.
The following table indicates calendar year 2008 direct premiums written in Connecticut:
Life, Health and Annuities $22,767,024,249
Property and Casualty Lines 6,480,642,767
Health Care Centers 2,434,234,777
Fraternal Benefit Societies 37,692,656
Surplus Lines 364,143,134
Risk Retention Groups 82,799,384
Pools and Associations 153,906,514
Total Premiums Written $32,426,940,924
In March 2008, the Life and Health Division prepared and submitted a report to the Governor and General Assembly regarding the Insurance Commissioner’s responsibility concerning managed care organizations. This report included a summary of quality assurance plans, potential modifications to the consumer report card, market conduct activity, a summary of complaints filed with the Department, a summary of violations, and a summary of issues discussed regarding managed care at public forums. In June 2008, the Division reported to the Governor and General Assembly that no managed care organizations failed to file any data as required by Public Act 97-99 and Public Act 99-177.
The following information is provided in accordance with Conn. Gen. Stat. § 38a-13:
During fiscal year 2008-2009, the Insurance Commissioner served as the receiver of two domestic property and casualty insurance companies.
The Connecticut Surety Company -- The Insurance Commissioner was appointed Rehabilitator of The Connecticut Surety Company ("CSC”) by the Superior Court on February 6, 2002. CSC was a Connecticut domiciled surety company that issued commercial and contract surety and fidelity bonds. CSC’s principal offices were in Hartford, Connecticut and were licensed to transact the business of insurance in Connecticut and 25 other states and the District of Columbia. On May 17, 2002, the Superior Court entered an Order of Liquidation, which declared CSC insolvent and appointed the Insurance Commissioner Liquidator of CSC. The Liquidator was directed to take possession of the assets of CSC and to administer them under the supervision of the Superior Court. All policies and contracts of insurance or bonds issued by CSC were cancelled by the Liquidation Order. Promptly after the issuance of the Liquidation Order, the CSC Liquidator mailed notice of the Liquidation Order to all known creditors of CSC, together with a copy of a proof of claim and directions to file with the Liquidator any and all claims against CSC on or before November 15, 2002. On May 16, 2003, the Liquidator filed her First Report with the Superior Court and noted therein that approximately 1,094 proofs of claim were filed with the Liquidator and that the CSC balance sheet as of March 31, 2003, showed assets of $6,152,664.20 and liabilities of $14,675,211.20. CSC and its corporate affiliates operated as an integrated organization, sharing office space, personnel and cash management systems. As a result of the management and shareholders’ abandonment of CSC’s corporate parent, Connecticut Surety Corporation, and its corporate affiliates, the Liquidator determined that the affairs of CSC’s affiliated entities should be wound-up as part of the receivership proceedings of CSC. The CSC Affiliates consist of the following companies: The Connecticut Surety Company, Connecticut Surety Corporation, Connecticut Surety Insurance Agency, Inc., Funds Management, Inc., Connecticut Surety Insurance Agency of Arizona, Inc., Bonds II Surety Group, Inc., and Connecticut Surety Insurance Agency of Nevada, Inc., (collectively, the “CSC Affiliates”). On May 29, 2003, the Superior Court granted the Liquidator’s Motion for Substantive Consolidation of CSC and its affiliates and entered an Order for Substantive Consolidation, which joined the CSC Affiliates in the pending liquidation proceedings. The Order for Substantive Consolidation directed the Liquidator to take possession of the assets of each of the CSC Affiliates and to administer the assets jointly along with the assets of CSC under the supervision of the Superior Court. The Liquidator promptly gave notice to persons interested in the CSC Affiliates of the Order for Substantive Consolidation and August 29, 2003, deadline for the filing of claims against the estates of the CSC Affiliates.
In December 2005, the Liquidator made an interim partial distribution of assets to certain Class 3 claimants holding allowed claims and paid $219,757.32 to creditors residing in Arizona, Connecticut, Oregon and South Carolina, thereby paying their claims in full. In addition, the Liquidator paid an interim partial distribution of 30% of the allowed claim to creditors residing in Alaska, California, Florida, Iowa, Louisiana, Maryland, Missouri, Nebraska, New Jersey, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas, Vermont, Washington, and Quebec, Canada. This partial interim distribution totaled $302,282.18. On August 15, 2006, the Superior Court granted the Liquidator’s Motion for Allowance of the Commonwealth of Pennsylvania Public Utility Commission Bond Claim. On September 26, 2006, the Superior Court granted the Liquidator’s Sixth Motion for Allowance of Claims. On October 26, 2006, the Superior Court granted the Liquidator’s Motion for Approval of Distribution of Assets to Certain Class 3 Claimants. This order authorized the Liquidator to pay 100 percent of the amount of allowed Class 3 claims held by Claimants (except for claimants that resided in states where the insurance department failed to return a deposit). In October 2006, the Liquidator entered into an agreement with the Massachusetts Insurance Commissioner for the release and transfer of the CSC $500,000 security deposit held by Massachusetts. The Liquidator received the deposit in November. On November 30, 2006, the Superior Court granted the Liquidator’s Seventh Motion for Disallowance of Claims. In November 2006, the Liquidator filed her 2005 U.S. Corporation Income Tax Return – Consolidated (Form 1120) and her 2005 Form 990 tax return with the I.R.S. On December 15, 2006, the Liquidator entered into an Agreement with the U.S. Department of Justice which waives the U.S. government’s recourse against the Liquidator for federal claims except with respect to four claims filed by the U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau originally totaling $361,308.44 but which have been allowed in a total amount of $114,192.89. On December 21, 2006, the Liquidator made her distribution to 377 Class 3 claimants in payment of their claims totaling approximately $741,000 and, when combined with the partial distribution to them in 2005, represented 100 percent of their allowed policyholder level claim against the CSC estate. On January 22, 2007, the I.R.S. granted the Liquidator’s Application for Recognition of Exemption from U.S. income taxes (Form 1024) effective January 1, 2002.
On October 31, 2007, the Superior Court entered an order granting the Liquidator’s Seventh Motion for Allowance of Claims. On November 28, 2007, the Court entered an order granting the Liquidator’s Eight Motion for Allowance of Claims, which approved allowance of 21 Class 6 and Class 8 claims. On February 20, 2008, the Superior Court entered orders approving the CSC Liquidator’s Eight Motion for Disallowance of Claims and Ninth Motion for Allowance of Claims. On May 14, 2008, the Court entered an order approving the Liquidator’s Tenth Motion for Allowance of Claims. On May 15, 2008, the Liquidator filed his 2007 consolidated federal tax income tax return for Connecticut Surety Corporation and its Subsidiaries, in Liquidation (Form 1120) with the IRS, as well as the 2007 Return for Organization Exempt from Income Tax (Form 990) for CSC. As of May 10, 2008, 1,244 proofs of claim of various classes of claims were filed with the Liquidator. On June 4, 2008, the Liquidator issued claim checks to the remaining class 3 policyholder claimants. On June 24, 2008, the Court held a hearing and entered orders approving the Liquidator’s Ninth Motion for Disallowance of Claims, approving the Liquidator’s final claims report, the administrative claim of the Insurance Department, and the Liquidator’s Sixth Report dated May 19, 2008, detailing the status of the liquidation proceedings. The consolidated balance sheet of CSC and the CSC Affiliates as of March 31, 2008, showed a deficiency of assets over liabilities of $9,280,060.74, with total assets of $3,908,814.68 and total liabilities of $13,188,875.42.
On November 14, 2008, the Liquidator issued final distribution claim checks to Class 6 (general creditors) in a total amount of $428,798.45. During December, the Liquidator completed the winding up of the affairs of the consolidated liquidation estate, including the deposit of all unclaimed property with the Treasurer of the State of Connecticut, the filing of final tax returns, and the closure of bank accounts. On December 31, 2008, the Liquidator filed with the Superior Court his Certificate of Discharge and Closure of Liquidation Proceedings of CSC and the CSC Affiliates.
Covenant Mutual Insurance Company -- The Insurance Commissioner was appointed Rehabilitator of Covenant Mutual Insurance Company ("Covenant") on March 1, 1993. Covenant was a Connecticut domiciled insurer established in 1831 and was licensed to do business in 31 states. On May 4, 1994, the Superior Court entered an Order (“Confirmation Order”) confirming a Plan of Rehabilitation of Covenant. The Confirmation Order, among other things, (i) confirmed the Covenant Plan of Rehabilitation (“Plan”), (ii) declared Covenant insolvent as of the date of the Confirmation Order, (iii) directed that the assets and liabilities comprising Covenant’s estate be liquidated as provided in the Plan; and, (iv) established a December 31, 1994, Bar Date for the filing of claims against the Covenant estate. On July 29, 2008, the Trustee filed with the Internal Revenue Service, a Request for Prompt Determination of Tax Liability under Rev. Proc. 2006-24 with respect to Form 1120-PC, Property and Casualty Income Tax Return for the years 2006 and 2007. On December 2, 2008, the I.R.S. pursuant to such request, informed the Trustee that the tax returns have been accepted as filed. On March 11, 2009, the Superior Court approved the Trustee’s Report to the Court for the Year Ending June 30, 2008. The June 30, 2008, balance sheet of the Covenant Mutual Liquidation Trust, as reflected in the Report, shows a deficiency of assets over liabilities of $8,718,389.40, with total assets of $13,722,889.45 and total liabilities of $22,441,278.85
The assets of the CMLT estate have been marshaled. The Trustee has made determinations with respect to the classification of all claims and has completed a thorough review of all proofs of claim filed with the CMIC estate that were classified in Classes 1, 2, 3, 4, 5 and 6. The Trustee has not made claim determinations with respect to claims that were classified below Class 6 because there are insufficient assets to pay such claims. On February 11, 2009, the Trustee issued 106 claim payment checks to all claimants in the Secured Class and Classes 1 through 5. This distribution represents a recovery to such claimants of 100% of the allowed Class claims. The Trustee estimates that holders of allowed Class 6 general creditor claims will be paid approximately 18% of the allowed amounts.
The Trustee hopes to complete implementation of the Court’s order authorizing closure of the CMIC estate by year end (i.e. final distributions to creditors, final tax returns, dissolution of the trust and escheat of remaining funds, destroy certain documents and transfer custody of other documents to the Department, file a certificate of closure with the Court).