New York Life Insurance Compliance Lawyer & Attorney : Currin Law Office : Annuity Compliance & Insurance Regulation

It depends, opined New York’s Office of General Counsel recently.

If a third-party administrator (TPA) is doing work that needs a license in New York – such as adjusting insurance claims – then a license is necessary. If it is doing work that does not require a license, then no license is needed, according to Alan Rachlin, an attorney for the Insurance Department.

The opinion was issued in response to an inquiry from a domestic life insurer's affiliate that administers employee benefit plans, including health, dental claims, and disability processing. This entity applied to another jurisdiction for a TPA license, and was asked for a letter from New York stating that New York does not require a license.

No letter is immediately forthcoming, because the issue is not clear cut.  The OGC said the TPA needs to submit a full description of all its activities. If none of the activities requires a license, then the state will issue the letter. 

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As regular readers know, the NYSID has developed and implemented a process to screen CL6 approvals for post-approval review priority.   In a recent discussion of this process, the Department asked that submission letters to be as detailed as possible because they are used to prioritize files for post-approval reviews. 

While one reaction to this request might be "Why should we provide additional information that could make it more likely that we will have a post-approval review?"  I must confess to having had that reaction initially.  It is hard not to get into a defensive mode when faced with the often adversarial feeling of post-approval reviews.  However, if you put yourself in the place of the person reviewing these approvals for prioritization, and then the person writing that first PAR letter, is that really how additional quality information would be viewed?  

It makes sense to think of what goes into the submission letters in the same context as that in which they will be reviewed.  Most of us are used to thinking about submission letters that will be read prior to the approval of the product - and drafting them to give the reviewer a sense of what they are looking at, but leaving the actual policy forms to speak for themselves with respect to compliance.  But these letters will be read for substance only after the product is approved.  So it makes sense that different information would be included.  In that light, some types of additional detail in the submission letter would be likely to help avoid PARs or, if the product is selected for a PAR, to get it off on the right foot. 

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Earlier this month, I indicated here that Massachusetts would be issuing a Bulletin eliminating the use of the lockbox and going to mandatory SERFF.  That Bulletin 2008-8, has now been issued and it provides very useful information about new filing procedures in Mass and provides an implementation date of 1/1/09 for mandatory SERFF.  

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Just a quick reminder that the first of the new annual reports of out-of-state filings is due on June 1, 2008.  The form, designed by the Life Bureau, is to be used along with the market conduct profile.  Because the market conduct profile may be completed by a different area than that which does the form filings, new coordination may be necessary for this year's filing. 

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What a difference a few months make!  As previously discussed here, the 2007 Annual Report from the NYSID to the NY Legislature indicated that there was a 29% rejection rate for CL6 submissions.  However, in a recent update on these numbers, the Department stated that rejections have dropped to 16% and that the average disposal time now is approximately 1 week.   That is of course, very good news - faster turnarounds AND fewer rejections! 

That is a great way to head into the summer, particularly when so many of us are gearing up for a portfolio of 2001 CSO filings! 

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The Actuarial Unit of the Life Bureau recently reported that despite the revisions to Regulation 50 in 2007 to permit increases in training allowances and raising the income ceiling for eligibility for  the allowances, few companies have implemented such changes. 

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The Department's 2007 Annual Report to the Legislature had a few paragraphs dedicated to the post-approval review process used by the Life Bureau.   The Department confirms what some may have experienced when they explain that a PAR often has 4 phases including development of an endorsement for in-force policies, remediation for non-compliance, submission of a new policy form for use on a going forward basis and finally possible disciplinary action against the company and/or the officer signing the certification.  This four-phase process is the explanation provided for the complicated and time-consuming nature of PARs. 

The Department also indicates that they are continuing to refine the process to prioritize approved files for post-approval review.  The highest priority, the Life Bureau reports, is given to "files with new, innovative or controversial features or files that raise solvency, consumer protection or market competition concerns."   They indicate that as of "January 7, 2008, over 1000 of the 3,692 certified approved files had been screened and assigned a priority rating and approximately 170 certified approved files had been assigned for post approval review."   (Note that this refers to files, not forms.  Each file could contain multiple forms.) 

The report does not say how many PAR files had been completed by January 7, 2008 or how many involved which of the four phases of review.   As has been indicated here recently, closings appear to be happening more frequently lately, but the ones we've seen have not included all four phases described above.  Additional data on the course and ultimate dispositions of PARs would be very helpful for companies analyzing which filing process to use. 

 

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In its 2007 Annual Report to the Legislature, the NYSID Life Bureau reports that it processed 1,740 files (7,770 forms) in that calendar year.  Of the 7,770 forms, 2,660 were individual life and 1,981 were individual annuity.  The rest were group life, group annuity, credit insurance, viatical settlement and miscellaneous policies.   These are broken down in Table 14 of the Annual Report. 

The Life Bureau reports that approximately 33.6% of the 7,770 were submitted for full prior approval and approximately 65.3% were submitted under a certified process. 

Of course, some of the 7,770 were seen by the Department more than once, because rejected files are often re-submitted.  Of the prior approval files, 29.8% were rejected or withdrawn and of the certified files 29.3% were rejected or withdrawn.  It is very interesting to note the consistency of those numbers.  This consistency even persists in out-of-state filings where 29.9% were rejected or withdrawn!  (Because out-of-state forms no longer need be filed this last 29.9% is out of a much smaller total number of forms - just 1.1% of all forms processed were for out-of-state use in 2007). 

The annual report does not discuss the reasons for the rejections or withdrawals, but it would seem that more of the prior approval rejections/withdrawals would have been for substantive reasons as those submissions tend to be of the more complex and innovative products.  The 29% of certified filings would be likely to have more procedural errors in certifications, form number consistency and, in all likelihood, statements of variable material.  So while the numbers across all types of filings are virtually identical, it is likely that the reasons for the department actions  were very different. 

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In the last week or so, I have received a couple of closing letters from the NYSID on Post-Approval Review files.  They have been good news! 

Not only were the files closed, but these files were closed with no revisions for in-force business and no new forms for use on a going forward basis!  That result is a very good one.  The process, however,  was long and, more than once, very frustrating.  Well over a year is a long time for a company to be in limbo when there is an approved form's status in doubt.  There were many rounds of correspondence with both legal and actuarial.  There were many months in between each round. 

All that said, I am hopeful that working together we are making progress not only on the substantive issues over which there may be disagreement, but also with the process.  I am hopeful that these closing letters are an indication that with some additional experience on both sides, the process is improving and that it will go more quickly for future reviews than it did for these.    Good news makes me hopeful that more closing letters will come in and more PARs will come to positive conclusions!  

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Those of us who attended the recent AICP NE Chapter Education Day at UNH experienced a great day in a beautiful location.  The hotel and conference center were set in the woods as I have never seen before!  As always it was a fun and informative event and more about it will be posted here in the days to come!

And while there were many substantive issues discussed, one announcement that made a lot of people's day was that MA is joining the growing number of states where SERFF is mandatory.  However, it really wasn't the SERFF portion of the announcement that drew the most appreciation - it was the fact that at long last, MA is doing away - once and for all - with the lock box!!!  Along with the move to mandatory SERFF, MA is going to mandatory EFT and thereby eliminating the administrative nightmare and the delays caused by the antiquated lock box procedure.  A Bulletin was promised soon. 

 

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We often receive inquiries about e-commerce issues.  The  New York State Insurance Department's Office of General Counsel recently opined that insurers must get consent from each insured before making his or her policy available on-line in lieu of providing paper copies. But if consent is given, the electronic documents are admissible as evidence in court, according to the opinion.  This should give companies comfort as they move towards increased e-delivery and a paperless environment. 

The inquiry involved a company that offers its customers access to their policies through a portal on its Web site.  The company asked whether it needs permission to make the policies available exclusively on-line. OGC answered in the affirmative, citing the state Electronic Signatures and Records Act and the federal Electronic Signatures in Global and National Commerce Act. In both of the acts, the use of electronic signatures and records is voluntary on both sides of the commercial transaction.  OGC also referred to previous opinions in which delivery was via e-mail and stated that the web portal here did not change the analysis.

The company further inquired about how the courts would view a printout of a document that lives in cyberspace. The Department responded that courts will accept the printed document, as long it’s found to be an accurate representation of the electronic document. New York Technology Law § 305(3) provides that electronic records are given the same force and effect as any other record.

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