Washington State Insurance Commissioner Mike Kreidler has issued an order to suspend the insurance certificates of six Chubb & Son companies, effective Nov. 18, 2010. The move — which does not affect existing policies or renewals — would bar the companies from writing new coverage for 9 months. Kreidler is also proposing a $534,000 fine, contingent on a hearing, against parent company Chubb & Son.
The suspension order includes Federal Insurance Co., Pacific Indemnity Co., Great Northern Insurance Co., Executive Risk Indemnity Inc., Vigilant Insurance Co., and Northwestern Pacific Indemnity Co. All are property and casualty insurers. All are wholly owned subsidiaries of Chubb & Son. The policies affected are all commercial policies.
“It’s highly unusual for us to suspend a company’s certificate to sell insurance. But we’ve repeatedly tried to work with Chubb and its subsidiaries to fix a number of ongoing violations of state law,” Kreidler said in a statement. “Some of the problems that triggered this decision have been recurring for a decade.”
(Chubb & Son has filed an appeal over the order, which has resulted in a stay.)
The OIC said a key issue is Chubb’s repeated failure since 1998 to properly document the reasons for charging higher or lower rates on certain policies. Exams and audits dating back to 1998 find the same problem cropping up repeatedly. Since 2000, the company has been repeatedly fined and urged to fix the problems.
Repeated examinations and a series of company self-audits ordered by Kreidler since 2007 found hundreds of violations of state law, including numerous recent ones, the OIC said. In some cases, more than half the sample files checked had violations. The $534,000 fine amount was based on 534 violations of state insurance law, at $1,000 per violation.
“Insurance relies on a level playing field and fair competition,” Kreidler said. “Rate decisions must be based on a sound rationale and documented. Repeated exams showed that Chubb wasn’t playing by those rules.”
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