The Independent Insurance Agents of Hampden County hosted the Commissioner of Insurance, Dan Judson, at the Hilton Garden Inn, located by the Basketball Hall of Fame, in Springfield on Friday, October 30, 2015.
The informal event had a buffet luncheon followed by a speech by the Commissioner of Insurance Daniel Judson. The Association’s president, Carolanne Donoghue, of Personalized Services Insurance Agency, introduced the Commissioner to the attendees. During his speech, Commissioner Judson provided the attendees with a summary of his first six months in the job and the insurance issues that were “percolating” at the Division at the present time. These included homeowner insurance issues arising out of the extreme losses occasioned by this winter’s severity, long-term care insurance rates, the continuing issues with the Affordable Care Act and the Division’s focus on continuing education obligations of licensees.
A brief history of the Commissioner’s insurance background
The Commissioner started off his discourse on the first six months of his tenure as commissioner with a short summary of his background and the path that brought him to be appointed as Commissioner.
Interestingly, this is not the first time that Commissioner Judson has worked at the Division of Insurance. The Commissioner actually worked for 15 years at the Division between 1988 and 2003. He first started there as a lawyer before eventually becoming a deputy commissioner and general counsel for the Division. In 2003, he left the DOI to start an insurance regulatory practice at Morrison Mahoney, a large Boston insurance defense firm.
He subsequently left Morrison Mahoney to become the compliance manager of what is now Coverys, the medical malpractice insurer that arose from the Massachusetts Medical Malpractice Joint Underwriting Association. Coincidentally, former Commissioner Joseph Murphy left the Division this past December to become that company’s COO.
When the then president of Commonwealth Automobile Reinsurers (“CAR”), Ralph “Buddy” Iannaco, announced his retirement in 2011, Mister Judson decided to apply for the job. He had monitored CAR as staff attorney at the Division of Insurance and later had acted as outside counsel for CAR before he joined Coverys and said he thought that, “if I don’t try for this, I’ll kick myself for the rest of my life.”
He won the position as CAR’s president and served until he took over as Commissioner of Insurance in late April of this year.
A new perspective after six months as Commissioner
The commissioner started off his summary of his first six months on the job on a lighter note by saying, “I look blissfully back to my days at CAR…” Adding that at his new job, “It’s interesting, it’s never boring, there is no time to be bored.”
One attendee asked the Commissioner if he could share his perspective on what it was like to be back as Commissioner after having served earlier as Deputy Commissioner. In response, the Commissioner responded by saying that as general counsel at the Division for a number of years, he had worked closely with 6 or 7 commissioners during his term at the Division and so thought he knew what the Commissioner’s job was all about. During these past six months, however, he now sees that he really did not know as much about the job as he thought he did. He said that what he has learned so far is that: “I am learning everything [new].”
The Commissioner then went on to talk about the current issues at the Division of Insurance that he is spending his time addressing.
Homeowner informational hearings and readable policy language
The Commissioner spent some time talking about the informational hearings he is conducting around the state on the voluntary homeowner insurance market.
Following the hearing conducted by the Senate Post Audit committee in September of this year, Commissioner Judson said he decided to schedule informational hearings around the Commonwealth to compile some additional perspectives from consumers. He felt this was important since the genesis for the Senate Post Audit Hearing were consumer complaints about the rate increases, being requested by the insurers, based on the claims and the losses resulting from the extremely severe 2014- 2015 winter storms.
The Commissioner said that when he arrived at the Division in April, he immediately found out that there had not been a lot of consumer complaints regarding the claim handling by insurers on the huge number of homeowner ice dam claims made as a result of the severe winter. Overall, he thought that insurers had done a good job in bringing all the resources into Massachusetts that they needed. For example, he cited the fact that insurers had brought in extra claim representatives. The Division of Insurance and the Office of Consumer Affairs also had helped by expediting licensing for out-of-state appraisers and for out-of-state home contractors, respectively.
However, the Commissioner said that it was clear that consumers now had had personal experiences with their homeowner insurance policies. For many, he thought, for the first time, since this was the kind of product that you buy and ”God willing, all you need to do is put it in a drawer and not look at it for a year, until it’s time to renew it…”
As of the commissioners talk, he had held hearings in Lowell and that UMass Amherst.
Still scheduled our hearings in Worcester, during the first week of November, then there will be three more hearings, in Barnstable, New Bedford, and Boston during the first week of December, and then one in Boston.
The commissioner said that although the attendance so far has not been high he has had input from the hearings that has led him to believe that, “[It] maybe time to take a look at the policy forms… [to] make sure it is readable and understandable.”
The commissioner said that this review of the policy forms was a consequence of one hearing, where a consumer had related a story of losses that ended with his house destroyed by a neighbors retaining wall collapsing as a result of water run-off from the snow and rain this winter, but his homeowners claim denied because of a moving earth exclusion. This insured, the commissioner related, “had his policy in his hand, and he said this is 75 pages.” The insured then had told the commissioner, “I defy anybody to read this and understand it. Buried in here somewhere it turns out I’m not insured for moving earth, damage from moving earth.”
Commissioner encourages agents to attend and participate in informational hearings
The Commissioner directed the attendees to the Division of Insurance’s website where he said that the Division has the hearing notice and a web address that offers a drop mailbox, if anyone wish to submit any written comments or thoughts about the homeowner’s policy or homeowner’s insurance in general.
One point the Commissioner wanted to emphasize was that he would “love to have” agents attend the remaining informational hearings because they can provide him with direct information as to what issues there are in the homeowners insurance market and in the homeowners insurance policy forms.
The Commissioner said that agents are the face of the industry to their customers and that their customers are the consumers that he has to serve as commissioner. He also noted that the greatest and most important value that the agents add to the insurance equation is, “you’re the ones that can explain how the policies work, how these products work…”
The conundrum of long-term care policies
After discussing homeowner’s insurance, Commissioner Judson then turned his discourse to another important issue that he will be dealing with shortly: long-term care policies.
In starting off, he shared with the audience his “brief education on long-term care products” and how they had been created in the late 70s, early 80s, to address an obvious market need. Apparently, because there had been no prior experience with a long-term care product, carriers borrowed different elements from other products, such as disability and term life, including estimates of policy persistency and lapse rates.
Increasing medical costs and longevity, however, have greatly affected the underlying cost assumptions by which these products were originally priced so much so that they no longer seem valid.
The original target market for these products were people in their 50s. This target group have paid their premiums, but are now in their 80s and collecting from the policies. The problem stems from the fact that these early policies had very few limitation on them. Now with the rising frequency of disease of Alzheimer’s and similar conditions these insureds can require a lot of long-term care. So while the industry has learned over the years, the length of time that consumers are living have created these legacy blocks of business that are huge and actuarially underpriced.
As a result, the commissioner said that there has been a real push around the country to try to get some rate increases, however, Massachusetts has only granted one increase for this coverage in the last 8 to 10 years.
The Commissioner indicated that he is currently working with his actuaries in order to balance the consumer’s interests for the kinds of rate increases requested versus the financial condition of the companies and the actuarial soundness of any price required rate increases.
While calling the long-term care rate problem: “a conundrum”, he said that this administration is not one to kick a can down the road and that the Division was, “going to try to resolve the long-term care conundrum before the end of the year…”
He again emphasized that the difficulty was, on one hand, “the financial soundness of the companies” but, on the other hand, “you’ve got the fairness to consumers.” The Commissioner reiterated that, in this case, “the population of consumers that are going to be paying this are typically seniors, and they’re on fixed incomes…”
He finished this section of his discussion with the final comment, “it’s going to be a tough one…”
The Affordable Care Act and Dodd-Frank
Two of the biggest changes that occurred since the Commissioner had last worked at the Division have been the passage of the Affordable Care Act (”ACA”) and Dodd-Frank.
He said that he now has to spend about half of every day on health insurance issues, stemming from the Affordable Care Act. Also, he sits on the board of the Massachusetts Health Connector (“Connector”), which he characterized as, “an interesting experience, so far.”
His report on the Connector is that he was “optimistic that the exchange is going to work for open enrollment, which start[ed] on Sunday [November 1].”
In his role as Commissioner, he has been reviewing all the products and the rates filed for what is going to be sold on the Connector. The Commissioner thought that Massachusetts was doing very well in comparison to other states around the country in controlling the increases in health insurance rates. Although medical costs are just going “up and up and up”, he said “We’re pushing back and back…” and “We’re reaching a level with the carriers.”
He said that he thought that, as a result, there will still be very viable affordable products sold in the Connector. But he ended with, “We have our fingers crossed that that will work out well.”
Continuing education credits: a new paradigm
As the final topic of discussion, the Commissioner then spent a little time talking about continuing education (“CE”) and the new law that came in to affect in September 2014 that, he said, “put forth a new paradigm.”
The first issue for him was to make the decision as to “how far back should we look for prior CE credits and roll them forward.” He said that it was a very complicated situation that he had not been familiar with when he was previously with the Division.
“The decision I made was we’re going to go back as far as we possibly can through the Divisions’ records.” He justified this more burdensome record review for the Division by explaining that, “My point being if producers have taken the time to do what they should do and take the credits, and take the courses rather to get the credits, we [the Division] should make every effort to make sure that those are counted.”
He also said that, over some opposition from his staff, he made the decision to send the CE warning letter even though his staff who believed that the 2014 law was well known and that additional warnings were unnecessary to producers.
He said that he had received “good feedback” from different agents about the letter when they had come in to talk to him about different issues. They had told him that that they were grateful for the additional warning. At this point in his speech, the Commissioner related that one of these agents he was meeting with, needed his insurance license in a larger financial consulting business. This agent thanked the Commissioner because when he got the warning letter he realized that he had not fulfilled his CE requirement.
After finishing his talk, the Commissioner then took questions and answers from the audience. These questions related to long-term care insurance and to the new transportation networking company endorsement that the Division had just approved for USAA.
After a heartfelt round of applause from the attendees, the Commissioner left to return to Boston and the meeting adjourned.
The Independent Insurance Agents of Hampden County
The Independent Insurance Agents of Hampden County is a group of insurance agents, companies and vendors who believe strongly in the independent agency system. The purpose of our organization is to promote this system for what it is — the best and most effective distribution system of insurance products.
The group promotes that purpose through our regular luncheon meetings which are always spotlighted with programs directed to current events in the insurance business. The group holds an annual golf tournament that helps raise funds to execute its public awareness campaign which consists of radio, print and other media outlets. Its campaigns promote the independent agent distribution of insurance products and services, awareness of insurance coverages as well as advocacy of legislative concerns.
Interested readers can access group’s website and membership application by clicking here: The Independent Insurance Agents of Hampden County.