RESIDUAL AUTO CHANGES DELAYED:

Opponents of a new Massachusetts auto insurance residual market plan won a court stay just as some of the new rules were set to go into effect. In granting the injunction, Superior Court Judge Raymond J. Brassard found that plaintiffs including Commerce Insurance Co. and several agencies "demonstrated a reasonable likelihood of success" that they could win their case against a new plan.

The decision delayed implementation of the transformation of the residual auto insurance market organization, Commonwealth Auto Reinsurers, from a loss sharing to an assigned risk system called the Massachusetts Auto Insurance Plan. The injunction remains in effect until a court decides on the merits of the plaintiffs' case against the MAIP. State officials have asked the Supreme Judicial Court to hear the full case as soon as possible.

Commerce Insurance and other plaintiffs have argued that Insurance Commissioner Julianne Bowler exceeded her authority in setting up the new MAIP and that the new rules violate certain laws including the state's "take-all-comers" law requiring insurers to accept all risks. Arbella Mutual Insurance Co. has also joined the suit against the MAIP.

AIG COMP DATA QUESTIONED:

The Massachusetts Division of Insurance is questioning data submitted by American International Group to support workers' compensation rate recommendations in the state. Just two weeks before the Massachusetts Workers Compensation Rating Bureau's deadline for submitting a filing, state officials have called a special hearing into AIG's information used in the WCRB filing. "There are a lot of questions we need to ask before we can be comfortable with the information. We see some inconsistencies," Kevin Beagan, director of the DOI's rating bureau explained when asked about the public hearing scheduled for Feb. 16.

AIG and its affiliates write about 25 percent of the state's workers' compensation market but industry officials say the WCRB could still file without the AIG data if any problems can't be corrected.

RELL FILES MED-MAL BILL:

Gov. M. Jodi Rell has revealed a variety of proposals designed to help keep medical malpractice insurance affordable. Rell's proposal calls for prior approval of rate hikes of more than 10 percent and stricter reporting requirements on hospitals to help prevent medical mistakes. It does not include caps on damage awards but raises the possibility of such caps in the future if premiums do not decrease as a result of other reforms. Former Gov. John Rowland vetoed a medical malpractice bill last year because it failed to include damage caps.If the other proposals Rell has outlined do not result in a 15 percent reduction in medical malpractice insurance premiums over three years, the insurance commissioner is to convene a working group to determine an appropriate cap on non-economic damages.

The governor's proposals would: require that a jury consider all additional payments received by a plaintiff for the same injury when assessing damages; require that any payment over $200,000 be paid over time; require insurers to obtain prior approval for any rate increase of 10 percent or more.To reduce the number of medical mistakes, hospitals would be required to develop patient safety protocols and the Department of Public Health would be required to expedite the processing of medical malpractice complaints against doctors.

AG, GOV. DIFFER ON DISCLOSURE:

Connecticut Attorney General Richard Blumenthal has proposed the election of the state's insurance commissioner and mandatory rules of disclosure for insurance brokers and agents. Under Blumenthal's legislation, the elected commissioner would replace one who is now appointed by the governor. The rest of his legislation would require greater disclosure by brokers and agents about their fiduciary duty to consumers, similar to real estate agents. Insurance agents would be required to disclose in writing whether they are acting on behalf of the insurer. The disclosure would have to describe completely the terms and amount of any compensation. Brokers and agents would also be required to disclose the details of all quotes from insurers, and the reasons for the broker's recommendation. A consumer would have the option to be a broker's sole source of compensation for any business on behalf of that consumer.

Meanwhile, Gov. M. Jodi Rell and appointed Insurance Commissioner Susan Cogswell are supporting the efforts of the National Association of Insurance Commissioners to address the broker compensation issue. Rell and Republican leaders have filed their own bill that mirrors the NAIC model compensation disclosure act, which currently does not include fiduciary duty or full quote disclosure as called for by Blumenthal. The Rell proposal forbids an insurance agent or broker from receiving compensation from an insurer or other third party without first obtaining the customer's written consent for the compensation. The agent or broker also must disclose the amount of compensation from the insurer or other third party for an insurance policy, unless the amount is not known at the time of disclosure. In that circumstance, the agent or broker must disclose the method for calculating compensation and, if possible, a reasonable estimate of the amount.

OFFICIALS PRESS METLIFE ON JOBS :

Gov. M. Jodi Rell and Connecticut's U.S. senators are pressing MetLife for information about how its proposed acquisition of Travelers Life & Annuity will affect its work force in Connecticut. Rell wrote to MetLife chief executive Robert Benmosche, asking to discuss the company's plans and "what, if anything, the state of Connecticut can do to help preserve and possibly add jobs here." Sens. Joseph Lieberman and Christopher Dodd (both D-Conn.), also wrote to Benmosche, urging him that layoffs could damage the state's economy.

MetLife announced an $11.5 billion deal with Citigroup to buy its Travelers Life & Annuity unit and nearly all of Citi's international insurance business. The two companies, both based in New York, said the deal would make MetLife "the largest individual life insurer in North America, based on sales." The deal already has been approved by both boards and is expected to close in the summer. Travelers and the international operations that are being sold to MetLife employ 2,000 people in Hartford. MetLife is planning $150 million in savings from the deal, but not all the savings will come from layoffs, the company says. MetLife spokesman John Calagna told Associated Press that MetLife is "committed to Connecticut" and over the years has increased its staff in the state. MetLife employs about 1,200 in the state, a 40 percent increase over two years.

COASTAL PREMIUMS RISING:

Coastal property owners in Rhode Island are facing rising insurance costs. Insurance experts say some insurers are attaching more conditions to their coverages while others have stopped offering coverage to coastal homeowners. Some waterfront homeowners have been asked to get wind and hurricane deductibles up to 5 percent of replacement costs. "If (insurers) find any issues with a coastal property, they aren't going to insure it," John Golembeski, president of the Rhode Island Joint Reinsurance Association, told Associated Press.

The state's rising coastal insurance mirrors what is happening nationwide. It is driven in part by new storm models that predict Rhode Island would have $12 billion to $15 billion in damage from a direct hit by a hurricane like the one that swept up Narragansett Bay in 1938. "We haven't been hit by a hurricane in 20 years. Statistically, we're overdue," said Dennis Charland, executive director of the Independent Insurance Agents of R.I. The rates' rise also is due to higher property values, higher construction costs and higher reinsurance costs.

AUTO RATES FALLING:

New Hampshire drivers are benefiting from increased competition among auto insurers. Seven of the 11 auto insurance companies that have filed rate change requests with the state so far this year have asked for decreases, compared to five of 25 in 2004 and none the year before, according to the department of insurance. Companies have had a fairly decent experience the past couple of years in New Hampshire," said David Withers, a property/casualty actuary in the insurance department. New Hampshire has about 110 auto insurers, a number that has been fairly stable over the past few years, Withers said. The requests for rate decreases came after several years of rate increases, he said.

BENEFIT MANAGERS' DISCLOSURE BACKED:

A federal judge has sided with the state of Maine in an industry challenge to the constitutionality of a state law that requires pharmacy benefit managers to disclose side payments from drug companies and other financial information. U.S. Magistrate Judge Margaret Kravchuk's recommended a decision found in the state's favor on all issues raised in a 2003 lawsuit by the Pharmaceutical Care Management Association, a trade group representing benefit managers, or PBMs.

The law, which has been put on hold pending the outcome of the court case, was viewed by supporters as a means to promote transparency by giving health plan clients access to information about discounts, drug switching programs and any conflicts of interest involving benefit managers. The industry argued that the law was unconstitutional and could end up harming consumers because PBMs make use of confidential information to get drug companies to compete with each other by lowering their prices.

The lawsuit claimed that Maine's Unfair Prescription Drug Practices Act is preempted by federal law, would constitute a regulatory taking of trade secrets and revenues, and violates due process.

Kravchuk's recommendation now goes before a U.S. District judge. The recommendations of magistrate judges are in most cases accepted. Maine's law was the first of its kind. The PCMA has obtained a preliminary injunction barring enforcement of a similar statute in the District of Columbia. States that rejected PBM disclosure laws last year include California, Florida, Iowa, Kansas Maryland, Minnesota, Mississippi, New York, Vermont and Washington, the association said.

WORKERS COMP FUND BROKE:

The fund that pays New York injured workers whose workers' compensation carriers have gone belly up is itself nearly bankrupt, according to state officials. The New York Workers Compensation Security Fund has about $1 million left, with another $4.5 million in assessments still to be collected this month. The problem is that it has about $7.5 million in claims and expenses to pay out this and every month. "It's running short of funds," confirmed Michael Barry, spokesman for the New York State Insurance Department, whose liquidation bureau administers the backup fund.

The workers' compensation fund handles claims for an estimated 7,500 injured workers from across the state. The Pataki Administration has asked the legislature to grant the workers' compensation fund authority to transfer funds from another security fund, the property casualty security fund. The Pataki Administration is also recommending that the current 1 percent of written premium assessment on workers' comp carriers be raised to 2 percent.

OFFICIALS VOW CAUTION ON DISCLOSURE:

New York Acting Superintendent of Insurance Howard Mills and Sen. James Seward (R-Oneonta), chairman of the Senate Insurance Committee, told the Independent Insurance Agents & Brokers of New York Inc. that they would not seek "stringent" regulation governing how agents' and brokers' incentive fees are paid or disclosed to clients. Mills and Sen. Seward spoke at the Albany Legislative Day sponsored by IIABNY. "There's a big, big difference in my mind between a mega-broker who has a great deal of market share and power and the typical independent agent who operates in the neighborhoods across upstate and downstate New York," Seward said.

Mills stated that he would not "rush" to issue regulations governing agent and broker incentive agreements. However, Mills added, "If you're looking at contingent commissions that are just volume driven, there seems to be an obvious conflict with a fiduciary responsibility, and that's something we saw with the settlement yesterday," Mills said, referring to the $850 million settlement reached between Marsh & McLennan, the New York attorney general and the insurance department.

CITY TO APPEAL GAY MARRIAGE:

New York City will appeal a judge's ruling against the state ban on same-sex marriages, Mayor Michael Bloomberg said. The mayor said that while he believes such marriages should be permitted, he wants the issue to be settled in the state's highest court or in the legislature because "the public deserves the finality."

State Supreme Court Justice Doris Ling-Cohan ruled last month that the state law against same-sex marriage is unconstitutional. "Under both the federal and New York State constitutions, it is beyond question that the right to liberty, and the concomitant right to privacy, extend to protect marriage," Ling-Cohan wrote. She stayed her decision for 30 days, which the mayor said indicated that she felt it "should go to a higher court." If upheld on appeal, the ruling in New York would clear the way for gay couples to wed.

COMMISSIONER BAKKE RESIGNS:

Acting Gov. Richard J. Codey has accepted the resignation of Banking and Insurance Commissioner Holly C. Bakke. In her resignation letter, Bakke indicated her desire to spend more time with her son and to become more involved with her community. Her resignation is effective March 1. Bakke was appointed in February 2002 by then-Gov. James E. McGreevey. During Bakke's tenure, New Jersey enacted auto insurance reforms that prompted several carriers to enter New Jersey and encouraged State Farm to remain in the state. The reforms have led to more than $300 million in rate reductions for more than two million New Jersey drivers.In addition, 41,000 previously uninsured drivers are now insured and contributing to the system and 1,200 new agents are now serving consumers across the state. The department also began initiatives aimed at making healthcare coverage in New Jersey more affordable.

BLUES CAN KEEP SURPLUSES:

Pennsylvania's four Blue Cross health insurance corporations may retain cash surpluses that amounted to $3.9 billion at the end of 2003. Insurance Commissioner Diane Koken's recent ruling ended a two and one-half year process by also establishing how much extra money Highmark Inc., Capital Blue Cross, Blue Cross of Northeastern Pennsylvania and Independence Blue Cross can keep.

"We have determined that the plans are not operating with inefficient or excess surplus," Koken said. Smaller cash surpluses could put the not-for-profit insurers at too great a financial risk, the department's actuary, Chet Szczepanski said.

Highmark spokesman Michael Weinstein said the surplus is needed for spending on equipment and other capital needs in the coming years. He said it amounts to a cushion of just more than $500 for each of the 4 million people Highmark insures.

DENN RESTRUCTURES DEPARTMENT:

Delaware Insurance Commissioner Matt Denn has outlined plans to reform his office structure in order to focus it on consumer protection. Denn also retracted his predecessor's request for funding from the state's general fund. "I will run the Insurance Commissioner's office next year without using taxpayer dollars," he stated. Denn proposed four structural changes in the office: a reduction in travel expenses; the creation of a full-time director of consumer affairs; the hiring of consumer affairs employees who will travel throughout the state in order to service consumers; and the hiring of a private law firm to represent health insurance policyholders with disputes.

TWO GUILTY IN RECIPROCAL OF AMERICA FRAUD:

Two former top officers of collapsed Reciprocal of America are scheduled for sentencing in June for their roles in what a federal prosecutor called one of Virginia's biggest insurance fraud cases. Kenneth R. Patterson was the president and CEO and Carolyn B. Hudgins was executive vice president of the company when it was placed in receivership in January 2003 with unpaid liabilities of $450 million. Both entered guilty pleas in U.S. District Court to conspiracy to commit insurance fraud and other charges. They are scheduled for sentencing on June 28.

Formed in 1976 when Virginia hospitals and physicians were having trouble getting medical-malpractice insurance, Reciprocal created related companies, Doctors Insurance Reciprocal and American National Lawyers Insurance Reciprocal, to protect doctors and lawyers. The companies, however, ran into financial difficulty when they attempted to expand into Alabama, Mississippi and Arizona.