Department Takes Hard Line on Fraud
Brown Chooses New Chief of Receivership
Flood Leaves Tragedy, Challenge in Wake
Pollution Exclusion Policy Comes Under Review
Consumer Complaints Fall for Fourth Year
High Risk Get New Hope from Health Plan
Fetes, the 'Net and Booklets Educate Consumers
Department Tracks '95 Health Legislation
DOI Shuts Down Insolvent Imperial Lloyds
The money lost to insurance fraud each year in Louisiana could be more than $500 million, according to estimates released by the Department of Insurance.
But fighting fraud continues to be a high priority of the Department, said Insurance Commissioner Jim Brown.
"I'm not just talking about policyholder fraud against companies, but also insurance company fraud against policyholders," Brown said.
Most of the fraud detected thus far has been found through examining the records of failed insurance companies and finding that the insolvencies were caused by mismanagement, theft and fraud.
The Department investigated and turned over information to prosecutors that so far has resulted in more than 60 convictions or guilty pleas to insurance fraud.
"What we found is that in most cases, these companies didn't go belly up because of bad luck or mismanagement, but because valuable assets were spirited out of the company and replaced with worthless ones."
In some cases, the companies went into business from the very start without the capital required to protect policyholders.
Brown said this was the case when top executives of Pelican State Insurance Co. were convicted in late August.
"The cleanup of insolvent insurance companies in Louisiana has been very successful," Brown said. "We put a system of regulation in place to spot troubled companies quickly, and to act before a small problem becomes a great insolvency."
Brown said a major problem with insurance company fraud is that those responsible for insolvencies traditionally have driven the companies into the ground, then left to go on to new crimes without being brought to justice.
However, the department has been taking a hard line on insurance regulation in Louisiana.
"A license for an insurance company in Louisiana isn't a license to steal," Brown said.
The department has been making regulation stiffer by imposing fines to the maximum, filing civil cases and lawsuits for the recovery of money, and turning the cases over to prosecutors to pursue criminal charges, Brown said.
"Insurance fraud has been a low risk, big profit crime in Louisiana, but we are on target to making it a risky business," Brown said.
Although combating insurance executive fraud has been a high priority for the Department, fraud against insurance companies is also a problem.
Brown said many insurance companies are hesitant to do anything about suspected fraud for fear of being sued.
"When we wrote our fraud statute, we included provisions to protect anyone who reports cases of insurance fraud to the Department of Insurance," Brown said.
"Anyone reporting fraud to us in good faith is held harmless against being sued for damages because of it."
Brown said the fight against insurance fraud is tough because perpetrators of insurance crime tend to be creative and resourceful.
"There was an insurance agent in Shreveport who tapped into the Department of Public Safety's computer and made authentic-looking driving records," Brown said. "We've also had problems with people trying to cleanse convictions from driving records."
"There was another fellow in the Turks and Caicos Islands who operated out of a submarine, selling bogus vehicle insurance policies all over Louisiana not worth the paper they were printed on," Brown said.
Brown said that these stories may be extreme, but they point to lawlessness and other societal problems that lead to insurance fraud.
Said Brown, "These perpetrators may not be holding a gun to our heads, but they're robbing us just the same."
Louisiana Insurance Commissioner Jim Brown recently appointed Baton Rouge attorney Stanford O. Bardwell Jr. as director of the Insurance Department’s Receivership Division.
The Receivership Division is responsible for the regulation of financially troubled insurers in various stages of supervision -- conservation, rehabilitation and liquidation.
The Division also manages the assets of failed insurers, files lawsuits for the recovery of disputed assets, and investigates possible fraudulent diversion of assets.
“As a lawyer, former federal prosecutor, and administrator, Mr. Bardwell is highly qualified to tackle the complex tasks involving a major receivership operation,” Brown said.
Bardwell served as Deputy General Counsel for the Department of Energy in Washington, D.C., from 1986 to 1988. He also served as U.S. Attorney for the Middle District (Baton Rouge) from 1981 to 1986. Previously, he served as general counsel to a major Louisiana life insurance company.
Bardwell is currently Vice-Chairman of the Republican Parish Executive Committee for East Baton Rouge, and Louisiana Field Director of the Bill Glass Prison Ministry, a nondenominational mainstream evangelism program in prisons nationwide.
“Although we’ve made tremendous progress in the Department of Insurance, our job is far from over,” Brown said. “There are criminal activities going on, there are shysters who are ripping off Louisiana citizens, and there is still a great deal of insurance fraud in this state."
One of the responsibilities of the Receivership Division is to delve into the financial dealings of failed companies to be sure that as much of the assets as possible are returned to policyholders. That often means filing lawsuits against attorneys and accountants whose professional advice was responsible for fraudulent loss of assets.
“I’m counting on Stan Bardwell to bring his vast experience as a federal prosecutor and insurance company attorney to work with me, to keep up the reforms we've already put in place,” Brown said.
The Flood Assistance Centers have closed, but they have left memories, lessons, and a call to action in their wake.
The centers were run by the Federal Emergency Management Agency. The Department of Insurance helped process flood insurance claims, said Cathie Bourdet, DOI representative to the Jefferson Parish Center.
“The most common problem we heard was that people were not properly insured,” Bourdet said. “Many people had never read their flood policies, or did not have one, and they blamed their agents.”
Claims for flood damages suffered in the May storms have already reached $375 million and are expected to rise to $600 million, according to Elaine McReynolds, head of the Federal Insurance Administration.
Many people could not even make claims, because they had not bought flood insurance, Bourdet said. They did not realize it was a separate policy from homeowners insurance.
The results, in some cases, were heartbreaking. Bourdet said one elderly man had stayed in his home for a week in knee-level water until neighbors brought him to the center.
It was a strong reminder that people need to check on elderly neighbors and friends after a flood.
“Another story made me cry,” Bourdet said. “A woman who had recently lost her husband lost everything in the flood.
“Her son had attention deficit disorder and had gone into shock because of the flood events. It seems the woman had been paying her mortgage company for flood insurance, but the company had canceled it and never notified her.”
Department agents did all they could to help that woman and others like her, Bourdet said, but people need to be reminded to keep up with their insurance needs.
“Every homeowner should check into his or her flood insurance regularly,” Insurance Commissioner Jim Brown said. “Many people affected by the recent flood were able to recover their losses only because they thought ahead and bought flood insurance.”
Brown is pushing for passage of the Natural Disaster Protection Partnership Act of 1995, legislation that would ensure the state is protected in the wake of another flood.
“This program would keep property insurance markets open by preventing another severe natural disaster from causing a market disruption," Brown said.
The act provides incentives to reduce loss through well defined programs such as the enactment of sound building codes, improvement of emergency response, and enforcement of local land use ordinances, Brown said.
The act could be the key to ensuring that the most memorable lessons in the future come from schools, rather than flood waters.
Louisiana has become the focus of national attention for reviewing an insurance industry definition of pollution, which has left policyholders to pay for damages only vaguely linked to pollution.
The pollution exclusion is an exception to commercial general liability insurance coverage in instances when pollution is not sudden and accidental from the insured’s standpoint.
This exclusion was established by insurance companies in the wake of the chemical pollution problem at Love Canal, New York, in the 1970s.
The Louisiana Supreme Court found last August that the language used in insurance policies excluding coverage for “pollution” related losses was too broadly worded.
"We are concerned about the overly expansive definition given to the term pollution and its effect on small businesses, which do not pose a risk to the environment," said Insurance Commissioner James H. "Jim" Brown.
One insurance regulator cited an example in which a child was disfigured after falling on spilled alakali in a grocery store.
Under the wording of the insurance company policy, the store could be denied coverage because the spill could be considered a pollution loss.
"We are particularly concerned about the use of the exclusion in such types of insurance as Homeowners and Personal Auto where there is a great deal of potential for abuse," Brown said.
Brown said on Sept. 6 and 7 his department held a public forum on a rewrite of the pollution exclusion provisions.
"Our intent is to be fair both to the policyholder and the industry," Brown said.
Company representatives of major insurers from all over America attended the public hearing.
The information provided through testimony and written statements will be used to draft new rules and regulations in order to curb abuses of the pollution exclusion language.
Brown said the Louisiana Department of Insurance reviewed its files last year of the Absolute Pollution Exclusion going back to 1985.
Complaints filed with the Department of Insurance have dropped by almost 60 percent since Commissioner Jim Brown took office in 1991.
A filed complaint is any grievance against any insurance agent or company reported to the department.
In 1991 there were 7,328 filed complaints in the areas of auto, home, health & life insurance, HMO coverage, and workers' compensation. In 1992 that number dropped to 5,436, and in 1993, to 3,491.
Last year there were only 3,075 complaints; this year that number is projected to fall to 2,829. That's 4,499 fewer complaints than in 1991, the year Brown took over as Commissioner of Insurance.
“Complaints have dropped because the department has worked so hard,” Brown said. “We shut down a number of crooked companies and agents that were cause for complaint.
“We're still working on cleaning up the industry, but I think we've made a good start.”
After Brown came into office, he created the Division of Receivership, which manages the assets of failed insurance companies.
Pam Williams, head of the Consumer Affairs Division of the DOI, said the Division has helped with the crackdown on crooked companies.
"Complaints are going down because we are liquidating bad companies," Williams said.
She said consumers' main complaints are about slow payment of claims.
Automobile insurers account for the most complaints, but Brown says he and the department are working hard to clean up that area.
In 1991 the number of auto insurance complaints stood at 3,130. The total number of complaints projected for 1995 is 939.
“Everyone is required to have liability insurance if they own a vehicle,” Brown said. “So this has been a prime area that crooked agents and companies have preyed upon.
“But we've worked hard to fight this problem, and in the process we've shut down at least a dozen dishonest auto insurers since I have been in office. That's not going to change now.”
People who are considered high risk for health insurance now have more options.
By the end of August, 150 applications had been sent out for 100 newly-opened slots in the state- subsidized health insurance program.
“This program doesn’t advertise, so it may be the best kept secret in the state,” Insurance Commissioner Jim Brown said. “Before this major reform program was established, there were people who could beat a dread disease like cancer, but found they couldn’t beat the health insurance system.”
This is the first time in its short history that the Louisiana Health Insurance Association (LHIA) has cleared its waiting list for the insurance openings and is currently able to insure applicants who meet the criteria for the high risk pool.
Applicants for high risk pool coverage must be able to show that they can not obtain private coverage on their own or through their employer.
People wishing to apply must also show that they have been residents of the state for six months and are not eligible for insurance coverage through any other public programs.
Brown congratulated the high risk health pool’s Board of Directors on the job it is doing to assist those who are medically uninsurable.
The Board of the high risk pool voted to expand eligibility for pool coverage to those who can purchase some health insurance, but find that a particular health condition is excluded from coverage.
The Association’s high risk pool will soon have more than 500 medically uninsurable members enrolled and hopes to increase that number to around 700 in the next few months.
“Those who can’t get coverage for a particular health problem certainly should be considered medically uninsurable,” Brown said. “Thanks to an infusion of money from the Legislature, and the work we have done with the board, coverage is being offered to fill their needs.”
High risk pool members have major medical health coverage and the option to seek care through a preferred provider organization, similar to those used by most employer-provided health plans.
The state subsidized rates for the plan vary from a low of around $100 a month to a high of around $500 depending on the degree of coverage chosen and other characteristics of the applicant.
The pool gives substantial discounts to those who are nonsmokers due to the lower health claims nonsmokers experience compared to those who smoke.
Those interested in applying for coverage under the Health Insurance Association can call the Association directly at (504) 926-6245 or write the Association at P.O. Drawer 83880, Baton Rouge, La. 70884-3880.
Guides lead the way to meeting insurance needs.
An informed consumer makes a wiser consumer, which is the idea behind four new publications released by the Department of Insurance this summer.
“We hope these publications will allow consumers to make better choices concerning insurance and to be more satisfied with their policies,” said Commissioner James H. “Jim” Brown.
The first of the new publications is the Consumers’ Guide to Auto, Homeowners & Renters Insurance.
This publication gives tips for buying auto, home, and renters insurance, and explains insurance terms in layman’s terms so that every consumer can better understand their policies and what they cover.
“So many of the complaints that our Consumer Division receives could be easily resolved if consumers better understood their policies,” Brown said.
The guide also features worksheets that allow consumers to do comparison shopping by telephone.
The second of the new publications is the Consumers’ Guide to Health and Life Insurance.
“Many people do not realize how important it is to buy the right life insurance policy,” Brown said. “Often people want to make sure their loved ones are provided for after they’re gone, but they are not sure how.”
This guide will make consumers aware of the types of health and life insurance that are available. It also gives tips on how to better pick the right amount of insurance for each consumer's needs.
The guide lists pertinent questions consumers should be able to answer about their policies, and features comparison shopping worksheets, as well.
Also available is the Auto/Home Rate Comparison Guide. This booklet quotes rates for the seven biggest metropolitan areas in the state, as well as rates for rural Louisiana, as provided by 16 of the top automobile and home insurers in the state.
“The purpose of the guide is to provide people with a way of comparing companies when shopping for their insurance,” Brown said.
“Though price shouldn’t be the only factor in an insurance purchase, it is important. When you can, you should weigh other factors in your insurance decision, such as the credibility of a company,” Brown said.
The guide compares basic liability auto insurance rates for a single male, 18 years old and with two accidents on his record, with those for a married male with a clean driving record.
The insurance for a young, single male driver with a history of accidents is the most expensive, while the insurance for an older married male (and, usually, for females of the same age) is among the least expensive.
Brown said the companies listed in the guide are some of the top insurance providers in the state based on premium volume, but that many small, reputable domestic companies also provide adequate coverage.
Rates for the guide were effective January 1, 1995, but may fluctuate.
A very timely release from the department is the new Hurricane Preparedness Guide.
This guide explains how hurricanes could affect all parts of the state, why insurance is so important for protection from damage, how to make a plan for a hurricane situation, and what to do after the hurricane.
The Department's Senior Health Insurance Information Program (SHIIP) also is constantly putting out new publications -- rate comparisons, Medicare information.
All of these guides are available free of charge to consumers and companies.
They can be ordered through the Department of Insurance Hotlines at 1-800-259-5300 or 5301, or in Baton Rouge at 342-0895.
DOI builds new on-ramp to info. superhighway
The Department of Insurance is entering the information superhighway full throttle with its new consumer-oriented on-line home page on the Internet.
“Some people may not realize the potential of the Internet,” Insurance Commissioner Jim Brown said, “but this technology will allow us to tell the whole world about all the good things happening in the insurance industry in Louisiana.”
The Internet is an international computer network originally formed by the scientific community, the military, federal governments, and international business as a means of sharing research data.
That network has boomed in the last few years and now includes information on virtually every subject, from “chat groups” about politics and show business to home pages sponsored by major corporations and, yes, insurance departments.
The Department’s home page was designed to be user friendly, so that anyone with access to a personal computer, a modem, and an on-line service such as CompuServe, Prodigy or America On-Line, can view the page and read or download departmental and consumer information.
“This cost very little to start and costs even less to maintain, but it’s a great way to educate the public about what we do and to help people shop for everyday insurance needs, look out for fraud, or prepare for special insurance problems,” Brown said.
The Department’s home page offers 'Net surfers a host of options, from reading the agency’s mission statement and organizational charts, to browsing or downloading Department publications.
The first such publications are the Department’s Hurricane Preparedness Guide, which features tips on buying flood insurance and preparing for water catastrophes, and the Louisiana Insurance Update, the Department’s quarterly newsletter.
Soon to follow: a pair of consumers’ guides for buying auto, home & renters, and health & life insurance; a guide to fighting fraud, featuring some shysters’ most common scams; and a workers’ comp guide.
An e-mail center, which will accept comments and complaints from computer-friendly consumers, is also in the works.
“We’re constantly striving for improvement, and this system does just that,” Brown said. “It helps us learn from our consumers and lets us teach them in return. That makes us a better Department.”
You can reach the DOI home page through Mosaic, Netscape, or any other on-line information server at http://www.ldi.state.la.us.
Department uses fair play to spread good news
From Morgan City to Delhi, people are asking questions about insurance.
But would you believe the answers are coming from places like the Shrimp and Petroleum Festival, the Chicken Festival, and, perhaps, your parish fair?
That's right -- the Department of Insurance has been spreading the good news about Louisiana's reformed insurance industry by setting up display booths at local fairs and festivals.
"This is just an obvious way of reaching out to the people," Insurance Commissioner Jim Brown said. "Lots of folks have general questions about insurance, but just don't know who to ask. That's why we're here."
At each festival a department representative runs a booth for the duration of the fair, to answer questions and hand out informational material.
The festivals range from the Pickin’ and Ginnin’ Festival in Rayville to the Louisiana Shrimp and Petroleum Festival in Morgan City, from the Seafood Festival in Mandeville to the Chicken Festival in Dubach.
Information varies from tips on how to buy the best homeowners insurance and where to buy the cheapest auto coverage, to what to do when shopping for long term care.
At any given festival the department hands out bags full of material to more than 500 people, and individual information to at least 600 other people.
Department representatives say that people are very receptive to the information, and often have some general questions already in mind.
Since May, when parts of Southeast Louisiana were deluged by flooding, many people have had questions about flood insurance.
"These are important questions people need to ask," Brown said, "because there are rules about insurance people may be unaware of, and because flooding doesn't just affect people who live on the coast."
Many people want to know how they can file a complaint about their insurance company or agent.
In these cases, representatives try to supply people with the information they need, if they can, or direct them to the proper division of the Department.
"If people never call us in Baton Rouge, this might be the only way they get truly valuable information about insurance,” Brown said. “We only hope it helps them make wiser decisions about insurance.”
During the 1995 Legislative session, the Department of Insurance tracked and supported various health care insurance legislation.
The legislation which passed is listed below.
House Bill (HB) 318, Act 637 - Allows any woman insured under a registered HMO program direct access to an in-network obstetrician or gynecologist for routine gynecological care.
HB 836, Act 1050 - Provides for registration of dental referral plans by the Commissioner of Insurance; to provide for initial and renewal applications and application processes and fees; to provide for certain definitions; to provide for a study committee.
HB 857, Act 418 - Prohibits health and accident insurers from increasing their premium rates during the first 12 months of coverage and not more than once in any six-month period following the first 12 months.
HB 920, Act 678 - Allows for the standard 12-month pre-existing condition exclusion when someone first becomes covered under a health and accident insurance policy or HMO subscriber agreement, or when a covered person lacks continuous health insurance coverage for a period in excess of sixty days.
HB 1002, Act 236 - Authorizes court to require health insurance coverage on behalf of a child in any child support case.
HB 1218, Act 593 - Defines limited benefit and supplemental health insurance to include the La. Basic Health Insurance Plan Pilot Program.
HB 1258, Act 340 - Creates a data collection program in the Department of Insurance (DOI); requires annual report to be submitted to legislative committee; allows department to declare some information confidential.
HB 1259, Act 594 - Extends La. Health Care Commission to 1999; increases membership by including three additional association nominees.
HB 1278, Act 341 - Creates division of health insurance policy, research and development in DOI.
HB 1676, Act 1159 - Provides that a non-contract health care provider may be reimbursed by a HMO for emergency services and may balance-bill members of HMOs for these services.
HB 1796, Act 717 - Prohibits any group plan, HMO, nonprofit hospital, or the State Employees Group Benefits Program from consideration of Medicaid program eligibility of claimants.
HB 1804, Act 1173 - Allows community rating variance in premium rates to continue at 20% for individual and group policies.
HB 2297, Act 730 - Repeals the prohibition of excluded coverage for persons covered by federal and state government plans; allows health insurers to coordinate benefits with Medicare and Medicaid coverages.
HB 2303, Act 1231 - Provides for licensing and regulation of viatical settlement providers by DOI; provides for regulation of HMOs by DOI, including increased financial reports to DOI; provides for increase in capital and surplus requirements for HMOs to two million dollars.
HB 2384, Act 1242 - Requires La. Dept. of Health and Human Services to include with any Medicaid waiver request the establishment of the La. Access to Better Care Medicaid Insurance Demonstration Project.
Senate Bill 773, Act 391 - Sets guidelines for telemedicine, including reimbursement and anti- discrimination provisions.
The Insurance Department recently closed the books on yet another insolvent insurer by getting a court order for the liquidation of Imperial Lloyds Insurance Co.
“This finishes another chapter in Louisiana’s legacy of weak insurance regulation,” Insurance Commissioner Jim Brown said.
Brown said Imperial Lloyds is the first of many liquidations which will be completed in the near future.
“Under our reform regulatory atmosphere, we now have the ability to spot troubled companies early on, which allows us to invoke regulatory control to save a company or limit the losses,” Brown said.
Imperial Lloyds was incorporated on August 26, 1986, based in Opelousas. The company, which wrote automobile coverage, was placed in liquidation on August 8, 1991.
Brown said that by bringing the Department up to the accreditation standards of the National Association of Insurance Commissioners, consumers are now assured that insurance companies get much closer scrutiny than in the past.
“Weak regulation in the past was responsible for a wave of insolvencies that cost taxpayers and policyholders huge amounts of money in losses and drove up insurance rates,” Brown said. “This will never happen again in Louisiana as long as our regulatory system remains strong.”
Not every company in rehabilitation ends up in liquidation, however.
Earlier this year, the Department’s newfound regulatory strength pulled Metairie-based National Automotive Insurance Co. through rehabilitation and returned the insurer to financial health.
“It had never been done before in Louisiana,” Brown said. “But now more than ever, it’s likely to happen again.”