Underwriting – Property Casualty

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A. Expertise as to Underwriting Duties and Responsibilities of Property Casualty Insurance Companies as Commissioner of Insurance. I have had significant experience and responsibility in connection with determining and passing judgment on Property Casualty Insurance Companies’ underwriting duties and responsibilities.

Listen to insurance expert Bill Hager speak on Property & Casualty underwriting:

In particular, in my five regulatory positions previously described, I had daily responsibility to assure and to hold accountable all of the state’s 1,000 property casualty insurance companies for their underwriting obligations. I did so through a series of action steps and tools. The action steps and tools included the following:

1. NAIC Market Regulation Handbook. As Commissioner, I had as an available tool, the NAIC Market Regulation Handbook (“Examiners Handbook” or “Handbook”). Among other things, this Handbook sets forth standards to assess the underwriting behavior of insurance companies relating to (i) underwriting during the policy application process, (ii) underwriting during the time of policy issuance, (iii) underwriting responsibilities relating to the insurance company’s agents and (iv) underwriting matters that arise subsequent to policy issuance, for example during claim settlement time. The Handbook is used by every department of insurance in the United States. The standards have been universally agreed to by all of the nation’s Commissioners of Insurance as adopted formally by them through the NAIC. The standards of the Handbook are universally recognized as appropriate standards against which to judge the underwriting duties and responsibilities of property casualty insurance companies.

2. Market Conduct Examinations. On a regular basis, my regulatory agency conducted Market Conduct Examinations of property casualty insurers utilizing the Examiners Handbook to determine whether in fact the target insurer was meeting all of their obligations to their insureds and others as to underwriting issues. This action entailed physically going into the insurers’ application and policy issuance files to determine any errant action or inappropriate policy behavior. As further discussed below, errant insurers were warned, disciplined and prosecuted as required.

3. NAIC Financial Examiners Handbook. As Commissioner, I had available another tool, namely the NAIC Financial Examiners Handbook (“Financial Examiners Handbook”). Among other things, the Financial Examiners Handbook sets forth standards to assess property casualty insurer solvency on a triennial basis. Among other documents reviewed by examiners in reaching financial conclusions are insurer underwriting matters. As with the Market Conduct Examiners Handbook, the Financial Examiners Handbook is used by every department of insurance in the United States. Similarly, these standards have been universally agreed to by all of the nation’s Commissioners of Insurance as adopted formally by them through the NAIC. The standards of the Financial Examiners Handbook are universally recognized as appropriate standards against which to judge property casualty insurer behavior.

4. Financial Examinations. On a regular basis, my Department conducted financial examinations of property casualty insurers utilizing the Financial Examiners Handbook to determine whether in fact the insurer was and was likely to remain solvent. As with market conduct exams, financial examinations entailed physically going into the insurers’ operations and studying, among others, files to (i) assure compliance underwriting duties and (ii) to assure that financial reporting matters were properly carried out. As further discussed below, errant insurers were warned, disciplined and prosecuted as required.

5. Complaints From the Public. On a daily basis, my Department received incoming consumer complaints as to underwriting practices of property casualty insurance companies. This Consumer Protection Division was staffed by Department lawyers who resolved the individual complaint and also, equally important, those same lawyers also determined whether an insurer evidenced unacceptable practices — that is to say, whether the incoming consumer complaints in fact constituted a red flag as to an insurance company’s potential underwriting behavior across the board.

6. Prosecution. To the extent insurer behavior required formal action (whether as a result of complaints from the public or as a result of Department investigation through a Market Conduct Examination or the Financial Examination), my Department prosecuted such insurer companies under the state’s civil Administrative Procedures Act. In connection with such prosecutions, I served in various capacities during my many years as a regulator, including serving as (i) prosecutor (as Assistant Attorney General), (ii) as the decision maker as to whether to initiate prosecution in the first instance (while First Deputy and Commissioner of Insurance) and (iii) as the Administrative Law Judge (“ALJ”) who presided over the prosecution and entered findings of fact and conclusions of law as to insurer underwriting practices. I have served as an ALJ in scores of such cases where the property casualty insurer’s (i) underwriting during the policy application process, (ii) underwriting during the time of policy issuance, (iii) underwriting responsibilities relating to the insurance company’s agents and (iv) underwriting matters that arise subsequent to policy issuance were the primary issues and I entered final decisions and orders in such matters.

B. Expertise As to Underwriting Duties and Responsibilities of Insurance Companies as an Insurance Industry Executive: CEO of a Major US Insurance Organization with Major Underwriting Duties. My experience at NCCI also resulted in expertise as to insurer responsibilities as to (i) underwriting during the policy application process, (ii) underwriting during the time of policy issuance, (iii) underwriting responsibilities relating to the insurance company’s agents and (iv) underwriting matters that arise subsequent to policy issuance, for example during claim settlement time.

The Gold Standard of Underwriting. While I was CEO, NCCI had the responsibility to formulate and submit for approval to most all of the Insurance Commissioners in the U.S., the underwriting standards used for underwriting most all of the workers compensation policies in this nation. Underwriting for workers compensation is routinely recognized throughout the industry as involving most intense underwriting of all lines of insurance. This is so because there are over 600 officially designated workers compensation classification codes an employee may be placed in based on their principal job duties.

NCCI authored and maintained a detailed, word-by-word, phrase by phrase description of as to each of these 600 classification code, as to which insurers was required to adhere. That entire intense underwriting process inclusive of its classifications is encompassed in an industry wide recognized and used document called the Scopes Manual and is recognized as the Gold Standard for underwriting workers compensation insurance. Furthermore, the underwriting process, regardless of the line of insurance is fundamentally the same. This is because most all property casualty insurers are about the business in the underwriting process of selecting the most favorable risks and rejecting the least favorable risks, regardless of the line of insurance. As such, the it is the same process brought to bear on different lines of insurance - always with the same goal: identifying good risks and rejecting bad risks.

C. Expertise as to the Property Casualty Insurance Companies: General Counsel to the American Academy of Actuaries. I served as General Counsel and Director of Government Relations for the American Academy of Actuaries. Academy members included affiliation with virtually every insurance company in America. Among other things, such actuaries had duties relating to the underwriting duties and responsibilities of insurance companies. The Academy’s Board of Directors was likewise made up of leading insurance company executives from such insurance companies.

D. Expertise as to the Underwriting Duties and Responsibilities of Property Casualty Insurance Companies: Attorney in Private Practice Iowa. As an attorney in private practice, I represented a number of insurer interests and became familiar with applicable property casualty insurance industry standards of practice, including insurer responsibilities toward the underwriting process, including working directly with the Professional Insurance Agents of Iowa, whose members had first line underwriting responsibilities as to property casualty underwriting.

Contact Bill Hager at 561-306-5072 or via email to discuss your case.

William D. Hager - Insurance and Reinsurance Expert and Arbitrator

William D. Hager

Insurance and Reinsurance
Expert and Arbitrator

561-306-5072


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