Massachusetts law requires “insurance agents, brokers and adjusters” to keep a record of complaints for two years. In fact, anyone in the “business of insurance” in Massachusetts, in theory, if not in practice, risks fines, license suspension, or license revocation for the “Failure to maintain complaint handling procedures” as required by G.L. c. 176D, § 3(10).
Complaint recording procedures required by G.L. c. 176D, § (3) (10)
The particular Massachusetts statute that mandates the maintenance of complaint handling procedures agents, brokers, and adjuster, as well as insurance companies, is found in G.L. c. 176D, § (3)(10). Its title is quite specific “Failure to maintain complaint handling procedures” and that title pretty much sums up what the short section mandates:
- Everyone in the business of insurance in Massachusetts
- [shall] maintain a complete record of all complaints received.
- The complaint record shall show the total number of complaints
- their classification by line of insurance
- the nature, disposition, and time of processing of each complaint.
The N.A.I.C. model act that this Massachusetts statute follows, in part, indicates that this provision was intended to apply only to insurers, since the requirement for maintaining complaints applies only “since the date of its last examination”. However, Massachusetts, as opposed to most if not all other states, deviated from the model act’s focus on insurers and added to the law an additional requirement that:
Agents, brokers and adjusters shall maintain any written communications received by them which express a grievance for a period of two years from receipt, with a record of their disposition, which shall be available for examination by the commissioner at any time.
The statute does not specify the actual mechanics of how this mandatory complaint handling procedure requirement applies to agents, brokers, and adjusters. Are they required to keep the same information required of insurers or something less? Guidance from the commissioner, who has the authority under the statute to “prescribe” the “form and detail” required for complaint records, would help. However, based on a review of the insurance section of the Code of Massachusetts Regulations, there does not appear to be any regulations specifying for insurers, much less agents, brokers or adjusters, what records have to be maintained. So agents, brokers and adjusters have to make an educated guess as to what the law reasonably requires them to do.
Definition of complaints under G.L. c. 176D, § 3(10)
The complaint handling requirement under the statute does have a definition of complaint:
For purposes of this subsection, “complaint” shall mean any written communication primarily expressing a grievance.
The statute, however, does not distinguish from whom the complaint must originate. While insurance applicants and existing insureds will almost certainly make up the bulk of the complaints an agency or broker will need to record, they may not be the only complaints under the statute that will require a kept record. One can read the statute to include complaints from, other agents, brokers, lawyers, or even insurers, for example. Likewise, the term “written communication” can encompass any type of writing including, but not limited to, letter, note, email, text message, or whatever so long as the communication “primarily express[es] a grievance.”
The Massachusetts statute does not define “grievance”. The N.A.I.C. model act does provide a definition in its version of what constitutes a “complaint”:
“Complaint” means a written or documented oral communication primarily expressing a grievance, meaning an expression of dissatisfaction. (Emphasis added).
The Massachusetts definition of “complaint” does not have this extra provision. However, since the statute does not say who must originate the communication, a note from a CSR relating an oral grievance regarding the company or agency communicated to someone else may satisfy the statute.
The number of potential recorded events increases if the “expression of dissatisfaction” standard applies to what constitutes a grievance, and, therefore, what constitutes a “Complaint”, that an agency has to document. However, for most agencies, brokers, or adjusters the number of statutorily defined complaints required to be recorded should be small and easily manageable.
Agencies, brokers, or adjusters who do not log complaints and maintain the record for two years as required may wish to consider the consequences
The complaint maintenance requirement is part of the unfair insurance practice act, G.L. c. 176D, that punishes each violation with up to $1,000 fines, license suspension or license revocation.
The above provision of G.L. c. 176D, § 3(10) regarding agents brokers and adjusters logging complaints would not necessarily seem to relate to the subject matter of Chapter 176D. “Unfair Methods of Competition and Unfair and Deceptive Acts and Practices in the Business of Insurance”.
The legislature though has specifically placed this particular provision in § 3 of Chapter 176D. The preamble to that section states that “The following are hereby defined as unfair methods of competition and unfair or deceptive acts or practices in the business of insurance.” Since the “Failure to Maintain Complaint Handling Procedures” appears as item 10 of that section, any insurer or agent, broker or adjuster, who cannot produce upon the commissioner’s request the statutorily required information violates the statute. Likewise, the inability to show that a procedures in place for maintaining such records, if they exist, constitutes a violation.
Since § 3(10) forms a part of Chapter 176D, the commissioner’s extensive enforcement powers are set out in § 7. If the commissioner initiates an informal enforcement action the result could be an agreed payment consisting of fines and costs. If the commissioner initiates a formal 176D proceeding against any person for a “Failure to Maintain Complaint Handling Procedures,” he must conduct an adjudicatory proceeding under the state’s Administrative Procedures Act. Since the legislature defined the failure to maintain complaint handling procedures as a per se violation of Chapter 176D, the potential consequences can include:
- If the act or practice is a violation of sections three [which failure to maintain complaint handling procedures is by definition]…, the commissioner may suspend or in the case of repeated violations revoke the license of such a party….
- In addition, [the commissioner may impose] a fine of not more than one thousand dollars for each and every act or practice.
The commissioner can and does impose fines under this statute against agencies, producers, and brokers. Yet, Agency Checklists did not find evidence that the commissioner has ever enforced this record-keeping requirement by way of fines or license suspensions or revocations allowed under G.L. c. 176D, § 7. However, until this law is amended, repealed or becomes the subject of detailed regulations, agents, brokers, and adjusters have no assurance that the commissioner will not do so in a specific case.
An adequate complaint handling procedure should be relatively easy to develop and institute, if not already in place.
Even though the perceived risk for failing to have a formal complaint management may seem vanishingly small based on enforcement to date, it still behooves agencies, brokers and adjusters to ensure that they have an adequate method to capture and report complaints in order to comply with the provisions of G.L. c. 176D, § 3(10) and to manage their businesses
Twenty years ago a manila folder marked “complaints” saving any complaint letters or notes received would probably have sufficed for compliance with this statutory section. Today, with the multiple communication channels and devices that all companies use for communications something more advanced may better serve anyone who has to comply with this law.
Agents may wish to see if their agency management systems have a separate complaint module or separate complaint maintenance function. Not surprisingly, in many cases this type of module may not be standard since few, if any, states have laws that change the N.A.I.C. model act to include agents and brokers. However, agency systems with customer relation management modules or features should be able to jury-rig an adequate if not elegant, system.
If an agency does not have a complaint handling system in place and decides to implement one to comply with the law, there are a couple of bullet points to keep in mind:
- Make sure that everyone recognizes a complaint under the law. A complaint does not have to be a written letter. Any type of electronic communication will likely qualify as a written communication under the statute.
- Make sure that there is a simple protocol to log any hard copy communications or electronic communications expressing a grievance to a folder on your computer system.
- Communicate to staff and producers that any grievance relating to the business of insurance, from whomever received, should be copied to the designated complaint folder. Also, they should know that the law applies not only to customer complaints, but also would apply to communications expressing a grievance from applicants, insurers, or other agents or brokers. If a grievance even remotely relates to the business of insurance, it should be recorded.
- Finally, the law does not specify how the agency has to handle the complaint, it only states complaints be recorded “with a record of their disposition.”
- Agents, brokers, and adjusters are only required to maintain complaint handling procedures, they are not required to resolve those complaints in any particular way. However the complaint is resolved, the record still must show how and when the complaint was resolved.