Insurance Regulations

Merchant Marine Act of 1920 (the Jones Act)

Because workers' compensation laws do not apply to seamen, the Jones Act allows insured seamen to make claims for injuries suffered during the course of employment. It also regulates maritime commerce in U.S. waters, transportation of cargo, and the rights of seamen.

Fair Credit Reporting Act (15 USC 1681-1681d)

The Fair Credit Reporting Act protects consumer privacy, while ensuring data collected is confidential, accurate, relevant and used for a proper and specific purpose. It also protects the public from overly intrusive information collection practices. When an application is taken, it must inform the applicant a credit report (from consumer reporting agency) will be obtained. The purpose of this is to determine the financial and moral status of an applicant (for variety of purposes such as employment screening, insurance underwriting or loan approvals). The applicant has the right to review the report. Applicant challenge - Credit reporting agency must reinvestigate within 6 months, if applicant challenges accuracy. Inaccuracies - Agency must forward to applicant inaccurate information given out within previous 2 years. Disallowed information - Report must not include lawsuits over 7 years old or bankruptcies over 14 years old. The Insurer is not responsible for correcting inaccuracies on any reports. However, if an applicant is denied coverage because of inaccurate information, they are entitled to certain rights.

Motor Carrier Regulatory and Modernization Act (the Motor Carrier Act of 1980)

Deregulated the trucking industry by prohibiting any entity from interfering with a motor carrier's right to set its own rates. Motor carriers and private motor carriers that transport property are required to establish evidence of financial responsibility in the form of insurance, a bond, a guarantee, or qualification as a self-insurer.

Fraud and False Statements (Fraudulent Insurance Act)

Fraud always involves a false statement and deceit; it can be either a criminal or civil crime. Federal laws prohibit the commission of fraud. In 2001, the NAIC adopted model legislation for the prevention and enforcement of insurance fraud. Subsequently, each of the states enacted its own Fraudulent Insurance Act. A fraudulent act involves a misstatement of material fact by a person who knows or believes that statement to be false. The statement is made to another person who relies on its accuracy to make a decision or to act and is subsequently harmed by relying on the deliberately false statement. State fraudulent insurance acts do not modify the privacy of any individual; they protect producers, brokers, and insurers in the event fraudulent information is provided by consumers. Insurance applications and claim forms must contain a disclosure about how false statements and fraud will be treated by the insurer. A sample warning is, "Any person who knowingly presents false or fraudulent information on an insurance application or claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison." If a person engaged in the business of insurance whose activities affect interstate commerce willfully embezzles, misappropriates funds/property, knowingly and with the intent to deceive makes a false material statement or purposely overstates the security of an insurer, the following penalties apply: A fine of no more than $50,000, imprisonment for up to 10 years, or both If the violation jeopardized the safety and soundness of an insurer and was a significant cause of the insurer being placed in conservation, rehabilitation, or liquidation by an appropriate court, imprisonment can be for up to 15 years If the amount embezzled or misappropriated does not exceed $5,000, violators will be fined up to $50,000 or imprisoned for up to 1 year, or both If a person uses threats, force or attempts to impede/obstruct the administration of the law during any proceeding involving the business of insurance before any insurance regulatory official, he/she will be fined up to $50,000 or imprisoned up to 10 years, or both. Any individual who has been convicted of a felony involving dishonesty or a breach of trust, who then willfully engages or permits an individual to engage in the business of insurance, and whose activities affect interstate commerce, will be fined up to $50,000 or imprisoned up to 5 years, or both.

Financial Anti-Terorrism Act (The USA Patriot Act)

Imposes record keeping and government reporting requirements on banks, financial institutions and non-financial businesses for specific financial transactions and customer financial records (a part of the Bank Secrecy Act).

Terrorism Risk Insurance Act and its Extensions of 2005 and 2007

The Terrorism Risk Insurance Act of 2002 (TRIA) was enacted in direct response to the terrorist attacks New York City and Washington, D.C. on September 11, 2001. Congress provided temporary financial compensation to insured parties during its crisis of recovery from the terrorist attacks.TRIA was intended to respond to the chaos the 9/11 terrorist attacks caused in the insurance industry as well as to assure that commercial property and liability insurance would continue to be able to provide coverage for the peril of terrorism. It also was a temporary program that allowed the federal government to share in terrorism losses with private insurers in the event a certified act of terrorism took place. TRIA expired on December 31, 2005 and was extended for two years, with changes, under the Terrorism Risk Insurance Extension Act of 2005 (TRIEA). It was extended with changes a second time, in 2007, under the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA) and is scheduled to expire on December 31, 2020. It protects consumers by addressing market disruptions and ensuring the continued widespread availability and affordability of property and casualty insurance for terrorism risk. The Act provides for a Terrorism Insurance Program established in the Department of the Treasury. The Secretary of the Treasury administers the Program and an "Act of Terrorism" is defined as any act certified by the Secretary of Treasury, in cooperation with the Secretary of State and Attorney General. Only commercial property and casualty insurance is covered by the Program; personal lines insurance and life and health insurance are not covered. No payment may be made by the Secretary under the Program with respect to an insured loss that is covered by an insurer, unless: The person that suffers the insured loss, or a person acting on behalf of that person, files a claim with the insurer. The insurer provides clear and conspicuous disclosure to the policyholder of the premium charged for insured losses covered by the Program and the Federal share of compensation for insured losses under the Program. The insurer processes the claim for the insured loss in accordance with appropriate business practices, and any reasonable procedures that the Secretary may prescribe. The insurer submits to the Secretary, in accordance with such reasonable procedures as the Secretary may establish. An insurer must make coverage for insured losses that do not differ materially from the terms, amounts, and other coverage limitations applicable to losses arising from events other than acts of terrorism. However, the Secretary shall not make any payment for any portion of the amount of such losses that exceeds $100 billion (cap on annual liability) and no insurer that has met its insurer deductible shall be liable for the payment of any portion of that amount that exceeds $100 billion. The insurer deductible is 20% of all covered losses and the insurance marketplace aggregate retention amount (the maximum losses the insurance industry must sustain before federal co-payments are available) is the lesser of $27.5 billion and the aggregate amount, for all insurers, of insured losses during such period. The insurance companies share of losses in excess of the deductible (amounts paid or losses exceeding insurer's deductible) is 15%, while the federal government is responsible for 85%.

Violent Crime Control and Law Enforcement Act of 1994 (18 USC 1033, 1034)

The largest crime bill in U.S. history expands funding to federal agencies such as the FBI, DEA, and INS and includes provisions that address (among other topics) domestic abuse and firearms, gang crimes, immigration, registration of sexually violent offenders, victims of crime, and fraud. The Act made it a felony for a person to engage in the business of insurance after being convicted of a state or federal felony crime involving dishonesty or breach of trust. Violations include willfully embezzling money, knowingly making false entries in any book, report or statement of the business, threatening or impeding proper administration of the law in any proceeding involving the business of insurance. Dishonesty - Deceit, misrepresentation, untruthfulness, falsification. Breach of Trust - Based on fiduciary relationship of parties and the wrongful acts violating the relationship. Penalties include fines and possible prison time Insurance license applicants and producers: Applicants who have been convicted of a felony must apply for Consent to Work in the business of insurance—prior to applying for an insurance license Producers must apply for consent in their resident state Officers and employees must apply for consent in the state where their home office is located Prohibited persons (convicted felons) must apply for consent in order to discover if they are permitted or prohibited from the insurance business Reciprocity - If consent is granted by any state, other states must allow the applicant to work in their states as well Consent Withdrawal - If conditions of consent are not continually met, the consent may be withdrawn

Gramm-Leach-Bliley Act (GLBA, a.k.a. the Financial Services Modernization Act of 1999

This act repealed parts of the Glass-Steagall Act of 1933 to allow the merger of banks, securities companies, and insurance companies. It also established the Financial Privacy Rule and Safeguards Rule for the protection of consumers' privacy. The Financial Privacy rule requires "financial institutions," which include insurers, to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter. The privacy notice must explain: The information collected about the consumer. Where that information is shared. How that information is used. How that information is protected. The notice must also identify the consumer's right to opt out of the information being shared with unaffiliated parties pursuant to the provisions of the Fair Credit Reporting Act. Should the financial institutions privacy policy change at any point in time, the consumer must be notified again for acceptance. Each time the privacy notice is re-established, the consumer has the right to opt out again.