Insurance Department

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 – 140

Recurring operating expenses – $21,994,645.28 – Fiscal Year 2009 - 2010

Organizational structure – Administration Division; Consumer Services and Business Regulation Division; Financial Regulation Division; Legal Division; Licensing Division; Life and Health Division; and Property and Casualty Division and Actuarial Division.

Mission

The 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.

Statutory Responsibility

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.

Public Service

The Consumer Services and Business Regulation Division consists of the Consumer Affairs Unit, the Market Conduct Unit, the Fraud and Investigation Unit, and the Licensing Unit. The Consumer Services and Business Regulation Division’s outreach program educated the community on insurance matters 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 outreach program focuses on senior groups, small business owners, health fairs and medical providers. During FY 2009-2010, the outreach programs continued to include military personnel with presentations at the U.S. Naval Submarine Base, New London. One session alone included over 900 sailors. The unit continued educational efforts with “Insure U,” an education program for consumers hosted on the Department website, and informed consumers of this tool during 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 2009 - 2010, the unit responded to almost 6,915 formal complaints, handled over 24,000 phone calls, and provided consumer education through distribution of almost 500 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 examinations of licensed insurers’ and other business entities books and records as they relate to coverage written for Connecticut citizens and commercial enterprises. Market conduct examinations address perceived market problems or violations of Connecticut’s insurance laws that affect Connecticut consumers. Examiners review insurance company market activity to insure compliance with Connecticut laws and regulations. Findings, indicating violations of Connecticut requirements, are resolved through administrative or disciplinary action. Examinations are conducted in accordance with uniform national standards and include investigations and examinations of insurers and other department licensees.

The Fraud and Investigations 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 Life Settlement Providers for compliance with our statutes. 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 Unit 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, appraise motor vehicle physical damage losses and adjust insurance claims. The Licensing Division meets this benchmark by developing and maintaining up-to-date standards and educational programs for all licensees including, but not limited to, Continuing Education for resident producers. The unit also monitors and enforces compliance for nonresident licensees through our alliance with the National Association of Insurance Commissioners (NAIC). Online renewal for all licensees and online printing of licenses are planned for implementation in 2010, to provide a faster and more efficient process for licensees while concurrently reducing department expenses.

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 six 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. 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 Property and Casualty Division is primarily responsible for examining 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.

The 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 Legislative and Public Affairs Unit.

Improvements/Achievements 2009-10

The Insurance Department continues in its commitment to improve communications with the consumer and the public at large.  After launching the Insurance Department page on Facebook in April 2010, the agency has seen a steady growth in fans.   The Department will continue to post consumer focused information on this page and provide useful links and valuable insurance related tips. In addition, the agency has published informational web pages for COBRA/Continuation insurance, health care reform, and flood and disaster preparedness.  

Media relations and outreach continues to expand in light of the many insurance related issues facing the state.  The Department has responded to over 200 inquiries from the press, almost twice as many as the prior year.  Over a dozen news releases have been sent to the media, and the agency has been cited in 350 articles that provide key consumer information to the public.  In addition, important Consumer Affairs contact information has been provided through the media, further raising awareness about the Department's ability to assist consumers in resolving complaints against the insurance industry.

During fiscal year 2009-2010, Consumer Affairs Unit staff continued to work 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. Consumer Affairs and other Department staff worked closely with the U.S. Department of Labor, CMS and the Internal Revenue Service to deliver information and assist consumers regarding problems handling COBRA subsidies. Unit staff is presently working closely with the U.S. Department of Health and Human Services to deliver timely information related to the changes to health insurance due to the passage of federal health care reform, known as the Patient Protection and Affordable Care Act.

The Consumer Affairs Unit and other personnel within the Department worked with and continues to work with personnel form the National Flood Insurance Program to facilitate information to consumers on Flood Insurance and changes to the Flood maps. Consumer Affairs Unit staff also assisted Federal Emergency Management Agency personnel on damage assessments from recent storm damage throughout the State.

During fiscal year 2009-2010, 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 $1,309,500 in fines as a result of comprehensive Market Conduct examinations, during the 2009-2010 fiscal year. In addition, the Unit recovered $640,000 in fines as a result of utilization review and Market Conduct examination surveys for the same reporting period.

The Licensing Unit 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. In an ongoing effort to automate more licensing processes, the unit initiated use of National Insurance Producer Registry for company appointments as of May 2010. By fourth quarter, online resident license renewals as well as online printing of licenses for all licensees will be implemented, resulting in considerable cost savings for the Department.

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 annual interim review for year-ended 2009. During February 2009 the Agency was awarded the maximum 5 year accreditation award. Therefore, February 2014 is the date our next full Accreditation on site review will be scheduled.

Also, The Financial Analysis Unit completed review and approval of two 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 Financial Examination Unit completed 15 Financial Examination Reports for fiscal year 2009 – 2010.

The Legal Division, during Fiscal Year 2009-2010, promulgated nine regulations and assisted Department divisions in 66 administrative enforcement proceedings or stipulated settlements that resulted in the assessment of $2,114,477 in fines and penalties. The Division also supported 34 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 2009, 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 2,978 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 120 utilization review companies.

In March 2009, the Life and Health Division submitted to the Centers for Medicare and Medicaid Services (CMS), its application to renew the Health Reinsurance Association as the State Alternative Mechanism for the guaranteed issue offering in the individual health insurance market. CMS approved the submission in December 2009.

The Property and Casualty (P&C) Division received over 5,600 insurance program filings of rates, rules, and forms in fiscal year 2009-2010, compared with 4,400 in the previous fiscal year. The Division continues to assess its processes to develop efficient handling of filings and has improved communication with filers to assure higher quality submissions. Over the past year a backlog reached a high of 1,472 in January 2010 and has steadily declined the past six (6) months to 1,215. The division has also been successful at improving its average turn around time from 30% of the filings resolved in 90 days to 77% of filings resolved in 90 days.

The Department completed its second annual review of the exempt filings audit and determined the program continues to be effective and company compliance under the exempt filing review provisions continues to be good. As a result of the audit filings the department has instituted some modifications/enhancements to shore up the program further. This year the division implemented a telecommuting plan that has been very effective at improving productivity. This plan is monitored at the examiner level on a weekly/monthly basis and to date has delivered great results.

The P&C Division participated in a catastrophe preparedness seminar in Groton hosted by the CT Department of Environmental Protection and also attended a community forum hosted by the University of Connecticut Avery Point on “Beginning the Conversation Climate Change and Adaptation”.

The Division released updates to its coastal guidelines which were published in November 2009 and also issued a Notice to Producers and Brokers regarding the excess and surplus lines markets.

The Division prepared the legislature on medical malpractice rates which is submitted to the Connecticut General Assembly annually. The P&C division continues to actively review all homeowner rate submissions. In 2009 the division reviewed 48 filings overall within the limited regulatory authority of the department to disapprove rates in a competitive market. There has been success in reducing requested rate increases from 7.3% to 5.3%.

Information Reported as Required by State Statute

As reported by the Financial Regulation Division, as of July 1, 2009, there were 1,234 insurance companies licensed in Connecticut. Of that total, 112 were domiciled in the state of Connecticut. The Financial Regulation Division reviewed the applications of 27 insurers applying for licensure during the fiscal year. Of the 27 applications reviewed, 20 were licensed and 7 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, 2010, there were 1,240 insurance companies licensed and authorized to transact business in Connecticut.

During fiscal year 2009-2010, 12 on-site examinations of Connecticut domiciled insurers were completed. As of June 30, 2010, there were 10 examinations in progress.

The following table indicates calendar year 2009 direct premiums written in Connecticut:

Life, Health and Annuities $24,687,662,265

Property and Casualty Lines 6,375,423,304

Health Care Centers 2,711,950,041

Fraternal Benefit Societies 44,106,220

Surplus Lines 340,088,663

Risk Retention Groups 86,027,457

Title 101,620,536

Pools and Associations 153,262,043

Total Premiums Written $34,500,140,529

In March 2009, 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 2009, 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.

The following information is provided in accordance with Conn. Gen. Stat. § 38a-13:

During fiscal year 2009-2010, the Insurance Commissioner served as the receiver of one domestic property and casualty insurance company.

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. The June 30, 2009, 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

On September 11, 2009, 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 2008 and 2009 (Final). On June 8, 2010, the Internal Revenue Service (IRS) pursuant to such request, informed the Trustee that the tax returns have been accepted as filed. On February 25, 2010, the Superior Court approved the Trustee’s Report to the Court for the Year Ending June 30, 2009.

The assets of the Covenant Mutual Insurance Company 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 Covenant Mutual Insurance Company 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.

With the receipt of tax clearance from the I.R.S., the Trustee will make the planned final distribution to Class 6 general creditors early in the next fiscal year and expects to close the Covenant Mutual Insurance Company receivership estate by year 2010 after this distribution and the final payment of administrative expenses, the closure of bank accounts, the escheat of remaining funds, the disposition of receivership records and the filing of a Certificate of Closure with the Superior Court.