No. 31077 (Amendment): R590-191. Unfair Life Insurance Claims Settlement Practices Rule

DAR File No.: 31077
Filed: 03/26/2008, 03:19
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The rule is being updated due to the passage of H.B. 342. This bill will take effect on 05/05/2008. (DAR NOTE: H.B. 342 is found at Chapter 345, Laws of Utah 2008, and will be effective on 05/05/2008.)

Summary of the rule or change:

In Section R590-191-1, the statutory reference Section 31A-22-428 is added. In Section R590-191-5, new language adds requirement for payment of interest on death proceeds. A penalty section, R590-191-7, has been added, as well as a new enforcement date section, R590-191-8.

State statutory or constitutional authorization for this rule:

Sections 31Al-2-201, 31A-2-202, 31A-21-312, 31A-22-428, 31A-26-301, and 31A-26-303

Anticipated cost or savings to:

the state budget:

The changes to this rule will have no impact on the workload of the Insurance Department. Department revenues could be increased with the addition of the unfair claims penalty. Penalty amounts would differ with each situation.

local governments:

Since this rule deals with the relationship between the department and their life insurance company licensees, it will have no impact on local governments.

small businesses and persons other than businesses:

This rule addresses the way life insurance companies handle payment of claims. Insurance companies are composed of more than 50 people. Claims payments could affect small businesses that have life insurance on key people. This rule would make sure claims were handled promptly or additional interest rates were paid and penalties forfeited.

Compliance costs for affected persons:

Insurance companies will be required to pay interest on all death proceeds. Many are already providing this interest and some in higher amounts than required by the rule. Though there is a fiscal impact on the insurance company, paying interest provides compensation for the consumer and will encourage prompt payment.

Comments by the department head on the fiscal impact the rule may have on businesses:

This standard was taken from the requirements of the Interstate Insurance Product Regulation Commission (IRPC) which is a national central point for the filing of life insurance products. The IRPC is composed of 31 states at this time. Many life insurers licensed in Utah are already complying with the new provisions of this rule and will not be impacted by it. Those that are not will be required to pay interest on claims with. This rule will encourage prompt payment of claims. D. Kent Michie, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY UT 84114-1201

Direct questions regarding this rule to:

Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

05/15/2008

This rule may become effective on:

05/22/2008

Authorized by:

Jilene Whitby, Information Specialist

RULE TEXT

R590. Insurance, Administration.

R590-191. Unfair Life Insurance Claims Settlement Practices Rule.

R590-191-1. Authority.

This rule is promulgated pursuant to Subsections 31A-2-201(1) and 31A-2-201(3)(a) in which the commissioner is empowered to administer and enforce this title and to make rules to implement the provisions of this title. Further authority to provide for timely payment of claims is provided by Subsection 31A-26-301(1). Matters relating to proof and notice of loss are promulgated pursuant to Section 31A-26-301 and Subsection 31A-21-312(5). Authority to promulgate rules defining unfair claims settlement practices or acts is provided in Subsection 31A-26-303(4). The authority to require a timely response to the Insurance Department is provided by Section 31A-2-202(4). Authority to require payment of interest on death proceeds is provided in Section 31A-22-428.

 

R590-191-5. Unfair Claims Settlement Practices.

The commissioner, pursuant to 31A-26-303(4), hereby finds the following acts or failure to perform required acts to be misleading, deceptive, unfairly discriminatory, or overreaching in the settlement of claims:

(1) concealing from or failing to fully disclose to a claimant any benefits, limitations, exclusions, coverages, or other relevant provisions of an insurance policy or insurance contract under which a claim is presented;

(2) denying or threatening the denial of a claim for any reason which is not clearly described in the policy;

(3) refusing to settle claims without conducting a reasonable and complete investigation;

(4) refusing to provide a written basis for the denial of a claim upon demand of the claimant;

(5) failing to provide the claimant with a written explanation of the evidence of any investigation or file materials giving rise to the denial of a claim based on misrepresentation or fraud on an insurance application, when such misrepresentation is the basis for the denial;

(6) compensating employees, agents or contractors of any amounts which are based on savings to the insurer as a result of reducing or denying claims;

(7) making a claim settlement to the claimant not accompanied by a statement or explanation of benefits setting forth the coverage under which the settlement is being made and how the settlement amount was calculated;

(8) failing to settle a claim following receipt of proof of loss when liability is reasonably clear in order to influence other claim settlements under other portions of the insurance policy coverage or under other policies of insurance;

(9) advising a claimant not to obtain the services of an attorney or other advocate or suggesting the claimant will receive less money if an attorney is used to pursue or advise on the merits of a claim;

(10) misleading a claimant as to the applicable statute of limitations;

(11) issuing a check or draft in partial settlement of a loss or a claim under a specified coverage when such check or draft contains language which purports to release the insurer from total liability;

(12)(a) for policies issued prior to May 5, 2008, failing to pay interest at the legal rate, as provided in Title 15 of the Utah Code upon amounts that are overdue under these rules. A claim shall be considered overdue if not settled within 15 days of completion of the investigation; or

(b) for policies issued on or after May 5, 2008, failing to pay interest in accordance with Section 31A-22-428; and

(13) failing to deliver a copy of the insurer's guidelines for prompt investigation of claims to the Insurance Department when requested to do so.

 

R590-191-7. Penalties.

A person found, after an administrative proceeding, to be in violation of this rule, shall be subject to penalties as provided under Section 31A-2-308.

 

R590-191-8. Enforcement Date.

The commissioner will begin enforcing the provisions of this rule immediately upon the effective date.

 

R590-191-[7]9. Severability.

If any provision or clause of this rule or its application to any person or situation is held invalid, such invalidity may not affect any other provision or application of this rule which can be given effect without the invalid provision or application, and to this end the provisions of this rule are declared to be severable.

 

KEY: insurance law

Date of Enactment or Last Substantive Amendment: [May 25, 1999]2008

Notice of Continuation: April 26, 2004

Authorizing, and Implemented or Interpreted Law: 31A-2-201; 31A-2-204; 31A-2-308; 31A-21-312; 31A-22-428; 31A-26-301; 31A-26-303