Vehicle Service Contracts / Vocabulary.
To best understand vehicle service contracts, it is helpful to begin with certain vocabulary that relates to the business.
The terms below are often found in the mix of VSCs, but because VSCs are generally governed by individual state law, terms may vary depending on the jurisdiction approving the VSCs.
- VSCs provide coverage to the purchasing consumer for required maintenance on their vehicle.
- A number of companies offer VSCs in the marketplace;
- In terms of vocabulary, we have the following considerations.
- “Administrator” is the entity that receives claims from the consumer and pays those claims. Separate and apart from administering claims as to VSCs, administrators may or may not also sell VSC contracts;
- “Seller.” A separate seller markets VSCs to consumers.
- “Financing Organization.” VSCs are most often paid for by the consumer across time in installment payments, with the financing provided by a “Financing Organization,”;
- “Provider” is that organization the provides the VSC to the sellers for sale to consumers; the Provider will be licensed by appropriate states and their VSC contracts approved by such states, with either the Commissioner or Insurance or in some states, the Attorney General (and sometimes another state agency) having regulatory authority over the Provider and the Provider’s products.
- The consumer generally makes periodic payments to the Financing Organization.
- “Dealer Profit.” Although governed by individual contract, often when the Financing Organization has received sufficient payments from the consumer, it pays over to the Seller, commission which is often characterized as “Dealer Profit”.
- “Dealer Cost.” Concurrently, the Financing Organization pays to the Administrator, Dealer Cost (i) to cover reserves to fund claims (ii) as well as a fee for its work as Administrator.
- “Discount Amount.” The Financing Organizations profit is often characterized as the Discount Amount;
- The VSCs are generally cancellable at any time by the consumer;
In connection with VSCs, my expertise can be summarized as below:
VSC: Rating and Policy Expertise: Regulatory.
My expertise as to these matters can be found in my regulatory background as follows. I am a former:
- Commissioner of Insurance (IA);
- First Deputy Commissioner of Insurance;
- Administrative Law Judge, F/K/A Hearing Officer at the Department of Insurance;
- Assistant Attorney General assigned on a full time basis to the Department of Insurance, and
- Member of the Executive Committee of the National Association of Insurance Commissioners (NAIC);
In those capacities, on a daily basis, I had full regulatory oversight and responsibility for (i) VSCs and the regulations of VSCs and (ii) the manner in which a VSC provider and seller and financing organization and administrator carried out their obligations and responsibilities.
VSC: Rating and Policy Expertise: Legislative.
In addition to my regulatory background, I have served or am serving in the following capacities, each of which included daily knowledge of and interaction with (i) VSCs and the regulations of VSCs and (ii) the manner in which a VSC provider and seller and financing organization and administrator carry out their obligations and responsibilities.
- Legal Counsel to the Iowa House of Representatives;
- Chief of Staff at the U.S. House of Representatives,
- Elected Member of the Florida House of Representatives (term ended 1/01/2019 in the Florida House of Representatives.) where I serve as a Member and Vice Chairman of the Insurance Committee (among other committees), which has legislative oversight over all insurance operations in the state (as administered by the Florida Office of Insurance Regulation) including those relating to VSC matters;
- In addition, I have sat on and served as Vice Chairman of the Civil Justice Subcommittee of the Florida House, which has responsibilities as to Florida laws that establish (among other things) liability,
VSC: Rating and Policy Expertise: Industry.
In addition to my regulatory background and my legislative background as to VSC matters, I have served or am serving in the following capacities, each of which included daily knowledge of and interaction with (i) VSCs and the regulations of VSCs and (ii) the manner in which a VSC provider and seller and financing organization and administrator carry out their obligations and responsibilities.
- American Academy of Actuaries, Washington, D.C., where I served as General Counsel and Chief Lobbyist;
- President and Chief Executive Officer of the National Council on Compensation Insurance (NCCI), a major U.S. property casualty insurance company doing business throughout the United States. While CEO, this position entailed responsibility for pricing some $100 billion of property casualty insurance premium;
- Nationally certified Reinsurance Arbitrator (ARIAS-US), where I sit as an arbitrator on disputes between (among others) VSC providers and (where applicable) their reinsurers,
- Attorney practicing primarily in the area of insurance and reinsurance and admitted to practice in Florida, Illinois (This Illinois license is in inactive status, placed there by me at my volition and eligible for reactivation at any point in time upon my request.) and Iowa (all upon examination) with an insurance practice;
VSC: Rating and Policy Expertise: Attorney.
In addition to my regulatory, industry and legislative background, I have served or am serving in the following legal capacities, each of which included daily knowledge of and interaction with (i) VSCs and the regulations of VSCs and (ii) the manner in which a VSC provider and seller and financing organization and administrator carry out their obligations and responsibilities.
- As stated above, I am an attorney admitted to practice in Florida, Illinois and Iowa (all upon examination) with an insurance practice;
- Legal Counsel to the Iowa House of Representatives;
- Practicing attorney at Hager & Schachterle;
- Iowa Counsel to the Property Casualty Insurance Association of America (PCIAA).
- Legal Counsel to the Professional Insurance Agents of Iowa (property casualty agents);
- Legal Counsel to the Iowa Association of Life Underwriters (life, health and annuity insurance agents).
- Practicing attorney (currently) in Florida at the Hager Law Firm;
- General Counsel and Chief Lobbyist to the American Academy of Actuaries;
Given all of this, set out below is my background specific as to commercial general liability insurance and related commercial general liability premium determination.
The above expertise should be read together with the balance of my background as outlined below: