California’s Flood Mitigation Initiative, Workers’ Comp Insurance Fraud, Over $300,000 in Compliance Fines

State-by-state variations of laws, compliance protocols, industry transparency, and general regulatory culture can lend one the impression that keeping up with industry changes is a little bit like herding cats. So, what better way to wrangle some of the more localized insurance news than in a Regulatory Roundup?

On an ongoing basis, in no particular order or rank, we’re wrestling the various regulatory changes, compliance actions, and commissioner decisions into our roundup. As a disclaimer: There’s a lot going on at any given time in these here United States, so this isn’t a comprehensive picture of state-level action by any means. Think of it, instead, as a sampler platter of regulation.

Also important to note: If we’re recapping interpretations of legal decisions, this is some armchair insurance speculation and not at all legal advice. If you need legal advice, get a lawyer.

California pilots pioneering parametric program in flood-prone city

Try saying that three times fast! In all seriousness though, climate-induced flooding remains a top concern for populations across the Golden State. With over seven million California residents at risk of flooding, the state is scrambling to spread awareness and prepare property owners for the upcoming flood season in whatever ways they can.

For Iselton, a small flood-prone city in the Sacramento-San Joaquin Delta, a community-based flood insurance initiative could make it easier for folks to get back on their feet after a catastrophe. The pilot project, spearheaded by the California Department of Insurance and funded by the California Department of Water Resources (DWR), is a first-of-its-kind initiative for the state. The innovative approach follows the structure of a parametric insurance policy to provide payouts to Iselton residents when flood waters reach a predetermined depth.

Speaking about the threat of climate-induced flooding on the state, California Commissioner, Ricardo Lara says, “We need to help our communities be more resilient to climate change and protect them from the devastating effects of flooding. Insurance is a key driver of financial resilience, and we need to think creatively about how new insurance pilots like this Delta community project can be tested and scaled to help our most vulnerable communities.”

According to a California Department of Insurance news release, payouts from the initiative, in combination with any existing coverage Isleton residents have through the National Flood Insurance Program, should be enough for community members to survive the aftermath of a major flood. Payouts could also be used to address wide-scale property damage as well as evacuation costs like lodging, food, transportation, and business interruption for Iselton residents.

This project is an exciting step toward a more resilient industry and we look forward to seeing it play out. For more information on parametric insurance as a tool for cost-containment, check out our Ebook: The Future of P&C Insurance: The Race to Contain Costs Amid Rising Catastrophic Losses.

Workers’ comp scheme racks up $200,000 in fraudulent claims

At this point, is it even a regulatory roundup without a case of insurance fraud? This time around, a for-profit vocational school owner in Fresno, CA was charged with 11 felony counts, including fraudulent insurance claims estimated to reach $200,000.

Paul Steve Ramirez, the 59 year old owner of P. Steve Ramirez Vocational Training Centers, is accused of fraudulently billing for workers’ compensation voucher services and failing to provide adequate training at the for-profit school he owns.

Ramirez, who also owns a vocational counseling business, thought he found a quick and fool-proof way to maximize his earnings by self-referring students at the counseling center directly to his educational institution. He also fraudulently collected Supplemental Job Displacement Benefit (SJDB) voucher funds from 37 different students over a three year period and billed insurance companies for services even when students didn’t meet the minimum qualifications for the course.

As a result, many of the injured workers Ramirez interacted with were unable to complete their course and receive their benefit. The Fresno County District Attorney’s Office is prosecuting the case, and we can only hope that justice will be served for the workers affected by Ramirez’s shady actions.

Washington Commissioner issues over $300,000 in fines

Washington state Insurance Commissioner Mike Kreidler reinforced just how important compliance is to your bottom line by issuing fines totalling $302,500 throughout the months of July, August, and September.

Over 20 insurance companies, agents, brokers, and other unlicensed entities received fines from the Commissioner over the summer months. Charges ranged from $250 for an individual licensee who provided incorrect, misleading, incomplete, or untrue information on his license application to $150,000 for a health insurer that improperly denied claims based on gender-specific procedure codes.

Other noteworthy fines include:

• $50,000 to a carrier for selling travel insurance policies and acting as an insurer in the state of Washington without a valid license or certificate of authority
• $10,000 to an entity for acting as an insurance agency without a valid license over an 11-year period
• $20,000 to a carrier for allowing 12 producer appointments to lapse for over 30 days

While some of these violations were the result of malpractice, it’s likely others were simply a byproduct of inefficient distribution channel management. We get it – keeping up with ever-changing state insurance laws and regulations for your entire distribution force is no easy feat. That is, unless you have an automated distribution channel management solution flowing up-to-date producer data and state-by-state compliance nuances directly into your daily workflows.

Learn how AgentSync can help you avoid fees like these by making compliance a breeze. And thanks again to Washington for illustrating just how much you can save by staying compliant!

Other state regulatory changes

Alabama announced insurance company appointment renewal invoices will be available for payment from Jan. 6, 2025 – March 1, 2025. The termination deadline is Dec. 31, 2024.

Colorado Commissioner Michael Conway adopted new regulations concerning Pediatric Dental Coverage Requirements. The new requirements bar carriers from selling a health benefit plan that doesn’t contain pediatric dental essential health benefit coverage to consumers with children under the age of 19 in the individual or small group market without obtaining reasonable assurance that such coverage has been purchased.

Connecticut established the Extreme Weather Mitigation & Resiliency Advisory Council to help strengthen homes and businesses against climate-related risks. The council, which consists of a diverse team of subject-matter experts, will explore mitigation programs and provide recommendations to enhance the state’s resilience to extreme weather events like flooding.

Florida granted a 60-day continuing education extension to all licensees with CE credits due in October, November, and December 2024 for any agents and adjusters affected by recent hurricane activity.

Massachusetts implemented new transaction types for processing Name Change (Demographic) updates. This went into effect Oct. 18, 2024.

Montana Commissioner of Securities and Insurance (CSI), Troy Downing, is pleased to report that State Farm has reviewed an additional 18,000 claims after facing a $4 million fine for unfair claims settlement practices. According to a press release issued on Oct. 17, 2024, The reviews saw an additional $5.2 million paid back to Montanans who were impacted by State Farm’s improper claims settling.

New Mexico declared a state of emergency after severe flooding devastated Chavez County. New Mexico Governor Michelle Grisham issued an executive order stating that insurers who write health policies in New Mexico must provide a grace period for insurance premium payments to any policyholder whose residence was impacted by the flood

New York State Department of Financial Services Superintendent Adrienne Harris issued new guidance to assist regulated entities in addressing and combating cybersecurity risks associated with artificial intelligence. This guidance takes a risk-based approach to aid the financial services sector in mitigating AI-specific cybersecurity risks like social engineering, enhanced cyber-attacks, theft of nonpublic information, and increased vulnerabilities from supply chain dependencies.

Oklahoma issued a bulletin regarding new requirements enacted by Senate Bill 543, which creates the Insurance Data Security Act. Key requirements include the obligation for certain licensees to submit annual information security program reports starting July 1, 2025 as well as an obligation to notify the Insurance Commissioner of any cybersecurity events involving nonpublic information within 3 business days when certain conditions are met.

Vermont is revising its appointment and termination fees to be $80 for carriers located outside the state and free for carriers located within the state for the Life and Accident & Health or Sickness Grouping, the Casualty and Property Grouping, and the Personal Lines, Variable Life and Variable Annuity, Car Rental, Credit, Self-Storage, Travel, Title, and Portable Electronics LOAs. Changes are effective Jan. 1, 2025.

While these points of interest aren’t comprehensive, our knowledge of insurance producer and variable lines broker license and compliance maintenance is. See how AgentSync can help make you look smarter today; head over to the Compliance Library and wrastle up some state-by-state regulation and more jurisdictional updates.

Topics
California
Fraud
Legislation
Flood
Workers’ Compensation