Annual Report of the Superintendent of Insurance to the New York Legislature Calendar Year 2005 Governor George E. Pataki Superintendent of Insurance Howard Mills www.ins.state.ny.us The One Hundred Forty-Seventh Annual Report of the Superintendent of Insurance A Report to the New York State Legislature for the Year Ending December 31, 2005 George E. Pataki Howard Mills Governor Superintendent of Insurance www.ins.state.ny.us Data in this report are subject to small table-to-table variations. Such variations are attributable to the fact that data are retrieved at various times throughout the year. Selected portions of this report are available on the Department’s Web site at www.ins.state.ny.us This report is printed on recycled paper. K: gen/AnnualReport05/ANNRPTCY2005 TABLE OF CONTENTS I. MAJOR DEVELOPMENTS A. Superintendent Mills Marks First Full Year in Office................................…..……. 1 B. Auto Insurance Premium Rates Fall for Second Straight Year..............……….. 1 C. Landmark Settlement Agreements Reached with Insurance Brokers ………….. 2 D. Disaster Preparedness ……………...………………………….………....…………….. 2 E. Property Bureau (Automobile)…………..…..............................…...…..............…... 3 F. Property Bureau (Non-Auto).........………………………….......…........................…. 4 G. Health Bureau.............………..............................….……………......................……... 5 H. Life Bureau.......….........................................………………………………………....... 6 I. Consumer Services Bureau…………………………………..………….……………... 6 J. Frauds Bureau……………...………………………………………….…….…………..... 7 K. Capital Markets Bureau…………………………………………………….………..…... 8 L. Systems Bureau – Internet Developments…………….……………….……...…..…. 8 II. REVIEW OF NEW YORK STATE INSURANCE BUSINESS A. Life Bureau 1. Licensed Life Companies......................................................…............................... 10 2. Domestic Life Companies.....................................................…............................... 10 3. Organizations Under Life Bureau Supervision......………………………....…........... 10 4. Licensed Fraternal Benefit Societies……………………………….………………..... 14 5. Private Retirement Systems..........................................…....................................... 15 6. Public Retirement Systems...................................................................................... 15 7. Segregated Gift Annuity Funds for Charitable Organizations.................................. 16 8. Employee Welfare Funds.........................................…............................................ 16 9. Viatical Settlement Companies............................................................................... 17 10. Examinations of Insurers Conducted ………........................................................... 17 11. Auditing of Financial Statements......................................................................…... 18 12. Real Estate Review.....................................................................................…........ 18 13. Actuarial Submissions and Reviews…………………………………………..………. 18 14. Insurable Interest………………………………………………………………………... 20 15. Market Conduct…..……………………………………………………………………… 20 16. Life Bureau-Albany………………………………………………………………………. 21 B. Property Bureau 1. Entities Supervised by the Financial Regulation Division…..……………................ 28 2. Property and Casualty Business..................................…........................................ 28 3. Financial Guaranty Insurance.......................……..........…..................................… 36 4. Mortgage Guaranty Insurance.......................................…...................................... 38 5. Title Insurance...................................................................…................................... 40 6. Advance Premium Co-operative and Assessment Corporations...........….............. 41 7. Special Risk Insurers (Free Trade Zone)..................................…........................... 42 8. Risk Retention Groups.............................................................................….......…. 42 9. Financial Examinations of Insurers ……………..........................................…......... 43 10. Lloyd’s of London................................................................................................…. 43 11. Finite Risk Reinsurance………………………………………………………………… 44 12. Certified Capital Companies………………………………………………………….... 44 13. Service Contract Providers……………………………………………………………... 45 14. Filings Involving Rate Changes, Policy Forms, etc. …………………………...…… 46 15. New York Property Insurance Underwriting Association ………..…………….…… 49 16. Medical Malpractice Insurance.……………………….……………..………….….…. 50 17. Workers’ Compensation…………………………………………………………..……. 52 18. Insurance Availability Issues……………………………………………………..…….. 53 19. Automobile Insurance ...............……………………………………………………...... 54 20. Homeowners Insurance………….…………………………………………………..…. 56 21. Market Conduct Activities………………………………………………………………. 59 22. Excess Line Insurance……….……………………………………………………..….. 63 23. Consumers Guide to Automobile Insurance……………….……………………..…... 70 24. Circular Letters ….......................………………………………………………..…….. 70 25. Individual Policyholder Complaints, Inquiries & FOIL Requests……..…………...... 72 26. Casualty Actuarial Unit……………………………………………………………...…... 72 a. Private Passenger Automobile Insurance……..........................……………….... 72 b. New York Automobile Insurance Plan.....................................................…........ 75 c. Workers’ Compensation Insurance....................................................…............. 81 d. P/C Insurance Security Fund (PCISF) Net Value and Contributions………..…. 86 C. Health Bureau 1. Entities Under Health Bureau Supervision……….……...........................…............. 87 2. Accident and Health Insurers..……………...........…........…..............................…... 87 3. Article 43 and Article 44 Corporations…..……….…………………………………..... 88 4. Examinations Conducted by the Health Bureau……………………………………... 91 5. SERFF…………………………………………………………………………………….. 91 6. Review of Accident and Health Policy Form Submissions................................…... 92 7. Review of Rate Filings by the A&H Rating Section….…………………………..…... 93 8. Inquiries and Complaints……………………………….……………..…………….….. 93 9. Utilization Review Reports…………........................................................................ 94 10. External Appeal Law & Program..………….……………………………….…………. 94 11. Market Stabilization Mechanisms……………………………………………………… 96 12. Health Care Reform Act of 2000 – Individual Market Reform…........................….. 96 13. Health Care Reform Act of 2000 – The Healthy NY Program………………........... 97 14. Federal Tax Credit Initiative…………………………………………………………….. 100 15. COBRA Subsidy Demonstration Project……………………………………………… 100 16. Continuing Care Retirement Communities ……………...…….…………………..…. 101 17. Long Term Care Insurance ……………….………………………………………….… 101 18. Managed Long Term Care Plans…...…………………...................….……………... 102 19. Medicare Modernization Act (MMA)………….……………..…………………………. 103 20. Health Savings Accounts ...…………………………………………………………….. 104 21. Child Health Plus ……….……………………………………………………………….. 104 22. Early Intervention Program...…………………………………………………………… 104 23. Eating Disorder Legislation ..…………………………………………………………… 104 24. Contraceptive Equity Lawsuit …..……………………………………………………... 104 25. Innovations in Prescription Drug Coverage.………………………………………...... 104 26. Innovative Health Insurance Products………………………………………………… 105 27. Explanation of Benefits Circular Letter……………..…………………………………. 105 28. Discontinuations, Withdrawals and Mergers……………………………..…………… 105 29. Financial Risk Transfer Agreement …………………………………………………… 105 D. Consumer Services Bureau 1. Consumer Complaints……………………………………………………………..….… 107 -2- 2. Prompt Payment Statute……………………………………………………………..…. 108 3. External Review………………………………………………………………………….. 109 4. The Healthcare Roundtable………………………………………………….………..... 109 5. Special Investigations............................................................................................. 110 6. Investigations……………………………………………………………………...……... 111 7. Other Bureau Activities............…………...............................……………………….. 113 E. Insurance Frauds Bureau 1. Operational Overview…………………………………………………………………… 120 2. 2005 Highlights………………………………………………………………………….. 120 3. Team Building……………………………………………………………………………. 121 4. The Staff………………………………………………………………………………….. 121 5. Investigations…………………………………………………………………………….. 122 6. Arrests……………………………………………………………………………………. 122 7. Fines……………………………………………………………………………………… 123 8. Civil Enforcement………………………………………………………………………... 123 9. Fraud Prevention Plans/Public Awareness Programs………………………………. 123 10. Major Cases……………………………………………………………………………… 124 11. Staff Recognition Awards………………………………………………………………. 126 12. Foreign Delegations…………………………………………………………………….. 127 13. Partnering with Prosecutors……………………………………………………………. 127 14. Moving Up………………………………………………………………………………... 128 15. Upstate Seminars……………………………………………………………………….. 128 16. World Trade Center Update……………………………………………………………. 128 17. Directions for 2006………………………………………………………………………. 128 18. Legislation………………………………………………………………………………... 129 F. Liquidation Bureau…………………………………………………………..…………… 131 G. Information Systems & Technology Bureau……………………….………………… 132 1. Web Site………………………………………………………………………………….. 133 2. Intranet…………………………………………………………………………………….