PAMIC Achieves Major Financial Exam Reform with HB1851

June 25, 2018 9:49 AM | Vaughn Lawrence (Administrator)

After the long process of creating a bill and working with legislators and staff, HB 1851 was been signed into law by Governor Wolf on June 22, 2018!

PAMIC proposed numerous changes to the Insurance Department and General Assembly in Fall 2017 addressing long-simmering concerns over examinations costs and length. Working with our industry partners, PAMIC achieved a tangible success for our members. 

This Law goes into effect on July 23, 2018, and affects any exam started after that date. However, the Department intends to follow the requirements in this new law to current exams as well.  

Executive Summary: 

House Bill 1851 amends the Insurance Department Act of 1921 (act) to require transparency, further establish procedural guidelines for Insurance Department (department) examinations, and to establish the Joint Underwriting Association (JUA) under the act. assign additional duties to the JUA, and statutorily create the JUA Board House

This law amends Article IX(examinations) under the act to require the department to work with the insurance industry to utilize the most efficient means to conduct examinations, minimize costs, facilitate cooperation and communication between insurers and the department and increase transparency and efficiencies.

  • This law requires the department to hold a scheduling conference with an insurance company before commencing examination fieldwork. The scheduling conference shall include a discussion of the purpose and scope of the exam, the estimated costs for the exam, the types of information the company will be asked to produce, the most efficient means of conducting the exam, and any alternative approaches in performing the exam. The bill requires the department to provide a company with a detailed budget estimate no more than thirty days after the scheduling conference.
  • Within fifteen days of receipt of a budget estimate, the company and the department shall have an additional discussion regarding the most efficient means of conducting the exam and producing information. If necessary, revisions to the budget estimate shall be made the department, and the company may mutually agree to modify the time allotments. If the department determines that the cost will exceed the budget estimate by 10% or if there is a material change in staffing assignments, the department shall hold another scheduling conference.
  • This law establishes detailed requirements for billing invoices submitted to companies for examination work by contractors and the department.
  • This law requires the department to produce an annual examination and analysis report within thirty days of the end of each fiscal year. The report shall include the total amount of money billed to companies by the department and its contractors for financial conduct examinations, market conduct examinations, review of transactions required to be filed by regulated entities with the department, and solvency monitoring.
The report shall also include:
  • the identity of each contractor retained by the department and the amount of money billed by the contractor to companies,
  • the total amount of deposits into the Insurance Regulation and Oversight Fund as a result of market regulation activities for which regulated entities are responsible for paying,
  • an analysis of the effectiveness of the procedures under this article and recommendations to further improve the efficiency and transparency of the examination.
A last-minute amendment affects the Joint Underwriting Association (JUA) - the residual market provider of medical malpractice insurance in Pennsylvania.

This law requires the JUA to complete the following additional duties: 

  • Submit monthly reports to the commissioner of premiums collected and claims paid during the immediately preceding month;

  • Provide to the commissioner additional documents and information regarding the association's operations as the commissioner may request;
  • Within sixty days following the effective date of this section,
  • prepare and submit a new plan of operation for approval by the commissioner;
  • Submit to examinations. The law statutorily the JUA board and clarifies that it shall operate under the department.

This act shall take effect in 30 days. HB 1851 would not have been possible without the efforts of the PAMIC PAC. We hope that you will consider supporting our efforts to create legislation and regulations that will improve how insurance companies in Pennsylvania do business. Donate to the PAC today!

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