[TYPE THE DOCUMENT TITLE] [Type the document subtitle] [Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.] [Type the author name] 1/1/2015 1 State of Michigan Department of Insurance & Financial Services Patrick M. McPharlin, Director www.michigan.gov/difs 2 FROM THE DIRECTOR Submitted to: The Honorable Rick Snyder, Governor of Michigan Members of the Michigan State Legislature The Annual Report, prepared pursuant to Section 238 of the Michigan Insurance Code of 1956, 1956 PA 218, MCL 500.238 and Section 2108 of the Michigan Banking Code of 1999, 1999 PA 276, MCL 487.12108, is a valuable reference for information about regulated entities engaged in the business of insurance, banking, and consumer finance in Michigan. This report covers calendar year 2014. The mission of the Michigan Department of Insurance and Financial Services is to provide a business climate that promotes economic growth while ensuring that the insurance and financial services industries are safe, sound and entitled to public confidence. In addition, the Department provides consumer protection, outreach and education services to Michigan citizens. In 2014, we took a department-wide look at many of our processes and procedures. Several areas for improvement were identified, and while addressing them remains an ongoing effort, we are already experiencing greater efficiency. Offering more and more services online allows the division to better meet the needs of its stakeholders and to benefit from an elimination or reduction in paper processing. Our participation in the NAIC allows the division to influence model laws and future insurance trends. As a Department and as individuals, we value integrity, honesty, personal excellence, continual self-improvement, and accountability. We strive to create and maintain active relationships with both consumers and licensees in the insurance and financial services industries to ensure adequate protections while fostering growth, strength and sustainability. This annual report is also available on the Departments website at www.michigan.gov/difs under “publications”. Sincerely, Patrick M. McPharlin Director 3 CONTENTS Office Responsibilities 5 2014 Accomplishments 7 Budget 9 Consumer Services 11 Licensing 13 Credit Union 15 Banking 25 Insurance Evaluations 32 Receivership 35 Definitions 36 Regulated Entities 40 4 OFFICE RESPONSIBILITIES The Department is composed of eight program and regulatory offices: Banking, Consumer Finance, Consumer Services, Credit Unions, General Counsel, Insurance Evaluation, Insurance Rates and Forms, and Insurance Licensing and Market Conduct. Office of Banking Responsible for all aspects of the supervision, regulation and examination of state-chartered banks, savings banks, and trust-only banks. The office is also responsible for examining business and industrial development companies (BIDCOs). Office of Consumer Finance Responsible for the licensing, regulation, and examination of entities and individuals doing business under various Michigan consumer finance statues, including mortgage brokers, lenders, and servicers, mortgage loan originators, money transmitters, deferred presentment providers, direct loan companies, motor vehicle installment sellers and sales finance companies, and other consumer finance providers. Office of Consumer Services Responsible for managing consumer information and outreach, inquiries, and complaints; investigations of insurance agents/entities; web development and maintenance; forms development; and, overseeing the communication center which serves as the initial point of contact for all incoming calls and visitors. Office of Credit Unions Responsible for the regulation, examination and supervision of Michigan state-chartered credit unions. The office is also responsible for processing corporate applications filed by depository financial institutions. Office of General Counsel Responsible for providing legal advice and representation to the Director and DIFS staff with respect to: enforcement actions, formal administrative hearings, orders, rules, statutes, regulations, bulletins, declaratory rulings, health benefit claims, special projects, legislative research and analysis, and processing PRIRA appeals. The general counsel serves as FOIA coordinator, represents the Director on the State Employees Retirement System board, and acts as liaison with the Attorney General and other state/federal agencies. 5 Office of Insurance Evaluation Responsible for all aspects of monitoring and regulating the financial condition of risk bearing insurance entities including: the processing of applications for licensure filed by insurance companies; on-site financial examinations of domestic insurance companies; ongoing financial monitoring of licensed insurance companies and working with insurance companies reporting negative trends to take appropriate corrective measures. The office is also responsible for the licensing, monitoring and examination of captive insurers. Office of Insurance Rates and Responsible for enforcing Michigan insurance statutes and Forms regulations pertaining to rates and forms submitted by insurance companies and other licensed entities. Office of Insurance Licensing Responsible for licensing individual and agency insurance & producers, solicitors, counselors, risk retention groups, Market Conduct purchasing groups, reinsurance intermediaries and third party administrators. The office is also responsible for market conduct examinations of insurers, audits of insurance agents/entities and monitoring of all surplus lines tax filings and payments. 6 2014 ACCOMPLISHMENTS Economic Development Initiative: DIFS successfully launched an internship program last summer through which five interns from insurance companies spent time in each office of DIFS learning about various aspects of insurance regulation and gaining an understanding of how the department both protects consumers and supports the insurance industry. This year's pilot program was praised by both the interns and the insurers for which they work. In addition, the Department began a program aimed at colleges and universities to promote insurance as a career, as well as met with several insurance executives to determine their talent needs. Southeast Michigan Flood: After the disaster declaration, DIFS fielded over 450 additional calls in the week following the storm and, in an effort to further assist consumers, DIFS added flood information on the front page of its web site, provided staff to participate at multi-agency resource centers, and sent a communication to insurers asking them to continue their excellent service and handle consumers with patience and empathy. In addition, DIFS’ licensing staff worked evenings and weekends to process over 330 independent adjuster license applications so that additional adjusters could assist in handling insurance claims from the flooding. Michigan Health Care Cost and Quality Advisory Committee: In 2013, Michigan passed legislation implementing an expansion of the Medicaid program known as Healthy Michigan. As part of this legislation, a Michigan Health Care Cost and Quality Advisory Committee were established and Director Flood was selected as chairperson. This committee was charged with issuing a report with recommendations on the creation of a database on health care costs and health care quality in the state. The committee met numerous times throughout the year and developed a report to the Legislature that included a review of existing efforts across the United States to make health care cost and quality more transparent. The committee was made up of representatives of DIFS and the Department of Community Health, and chairs and minority vice chairs of the House and Senate Health Policy Committees. 7 Consumer Assistance and the Affordable Care Act: Under the Health Insurance Consumer Assistance Program (HICAP), DIFS continued its efforts to educate Michigan residents about the Affordable Care Act (ACA) and provide resources to help them understand and comply with the new laws. The HICAP website has been continually updated in order to be a helpful resource for Michigan residents who have questions or require further information about the changing health insurance landscape. In a 60-day period, the Health Plans and Managed Care Office reviewed 734 medical plans/rates and 228 dental plans/rates in preparation for being available on the Marketplace. “Reinventing Mi Retirement: In response to Governor Snyder’s Special Message to the Legislature on Aging delivered in June, DIFS was charged with creating a set of comprehensive financial planning tools and, in coordination with Office of Services to the Aging, state financial experts and community leaders, developing a public awareness campaign. In four months, DIFS secured grant money and 11 underwriting sponsors to fund the campaign; successfully partnered with a number of financial experts to develop the Reinventing MI Retirement Financial Toolkit, a package of financial tools and resources designed to provide Michiganders with information on personal finance, retirement planning, and avoiding/eliminating debt and other financial difficulties; and promoted the Reinventing MI Retirement initiative through 8 events around the state that were free to the public, and included speakers, workshops, and individual financial check-ups.