The Massachusetts Division of Insurance recently approved a set of revisions proposed by Commonwealth Automobile Reinsurers (CAR) to the standards governing private passenger and commercial auto insurance claims. CAR administers the state’s residual auto insurance market and develops the claims handling rules that insurers must follow. The changes approved are relatively targeted in scope but contain important updates to ensure the standards reflect current laws, resources, and procedures.
Screening Process for Injury Claims Updated
A key change affects the initial screening that insurers must conduct for bodily injury claims, including those filed under uninsured and underinsured motorist coverage. The standards currently specify that insurers must check the Central Index Bureau database as part of determining if any red flags exist related to the claim or claimant. However, the Central Index Bureau was purchased by another company and no longer operates as an independent industry-wide data source.
The approved revisions eliminate the specific reference to the Central Index Bureau. Insurers now simply need to search an appropriate industry-wide claims database as part of the screening process. This provides flexibility to use other current sources while still maintaining the expectation to review past claimant history.
New Requirement to Consult CAR Guidance on PIP Coordination
Another notable change involves claims for no-fault personal injury protection (PIP) benefits. The Division of Insurance previously issued a bulletin discussing how PIP payments should be coordinated with claimants’ health insurance and any medical payments coverage. However, the claims handling standards did not directly connect to that guidance.
The approved update now clearly requires insurers to consult the DOI bulletin before settling any injury claim involving coordination across PIP, health plans, and medical payments. This change emphasizes the need to cross-check multiple potential sources of benefits to avoid overpayment.
Standards Updated to Reflect Additional Lien Checking Requirements
The standards include an appendix listing statutory requirements for insurers to verify no child support liens exist before paying claims. A law enacted in 2003 added further responsibilities in this area by obligating insurers to also check for potential medical or public assistance liens with the Division of Medical Assistance and Department of Transitional Assistance prior to any third-party liability settlement.
The revisions approved by the DOI incorporate the text of the newer law into the appendix. This provides fuller guidance on all lien-checking duties insurers must complete before finalizing claim payments.
CAR Audit Rules Adjusted
Additional approved modifications relate to CAR’s own procedures for auditing insurer claim handling and practices. CAR conducts both regular “hybrid” audits of all auto insurers as well as more focused reviews when needed.
For private passenger claim audits, CAR will now conduct hybrid examinations every five years instead of three years. This change reflects the larger volume of insurers currently active in the Massachusetts auto insurance market. CAR indicated the shift will allow more resources to be directed to targeted audits of specific companies when required.
For commercial claim audits, no change was made to the hybrid review cycle. However, the approved revisions do now set a fixed sample size of 25 files to be examined during the standard commercial carrier audits rather than an approximate number. This creates more consistency in the commercial audit process.
Use of SIU Audit Templates Now Required
CAR rules require insurers to maintain a special investigative unit (SIU) to handle referrals of suspected fraudulent claims. Insurers must perform periodic audits of their SIU claim review procedures and report results to CAR.
The approved revisions now mandate that insurers use CAR’s prescribed template to report the internal SIU audit findings. This change applies to both private passenger and commercial claims. The required template will allow CAR to receive more consistent data on insurers’ efforts to combat fraud through claim review audits.
NAIC Claim Standards Updated
The CAR claims handling standards incorporate model claim practices published by the National Association of Insurance Commissioners (NAIC). The NAIC recently consolidated its guidance from fourteen specific standards down to eleven. The approved amendments update the appendix in the CAR rules to reflect the NAIC’s updated set of national standards and reference numbers.
Overall, this set of approved changes to the private passenger and commercial auto insurance claim rules in Massachusetts aims to clarify insurer obligations, improve the efficiency of oversight audits, and enhance the consistency of reporting. While the amendments may not be groundbreaking, they do ensure the regulatory standards governing claim handling align with current laws, resources, and insurance industry practices.
Copy of the Division of Insurance decision approving changes
You can obtain a copy of the Division of Insurance’s hearing officer’s decision explaining her approval of the changes by clicking HERE.