Tag Archives: insurance law

Court Dumps Lien Filing Fee Challenge

The 2nd District Court of Appeal has handed down a decision affirming the legislature’s creation of the lien filing fee as part of SB 863. In Chorn v. W.C.A.B., a physician (Robin Chorn M.D.) filed a complaint that was joined by two injured workers in an effort to challenge, on constitutional grounds, the imposition of a lien filing fee. The court, with frequent references to Angelotti Chiropractic Inc v. Baker, rejected similar arguments that were raised, which, unsuccessfully, (thus far) challenged the lien activation fee provisions of SB 863.

First, the court dealt with the issue of judicial standing for the injured workers—whether they could raise an issue of constitutionality regarding the lien filing fee provisions and in short order dismissed their claims in the case.

From the ruling:

Petitioners Kalestian, Vounov and Buie contend they have a “real and direct interest in challenging constitutionally infirm provisions of law that are transparently intended to impair access to expeditious treatment of their workplace injuries.” They claim that “the imposition of a lien filing fee that bears no connection to the value of the services rendered will make it less likely that medical providers will offer or render care to workers’ compensation patients on a lien basis,” and will “deprive injured workers of any choice as where [sic] they receive their care (if they receive care at all),” thereby “impairing the promise of unencumbered access to medical treatment of their injuries.” But petitioners have not submitted any evidence in support of these claims or any details of their alleged injuries beyond the bare assertion that they have “been denied medical care access as a consequence of SB863.” Moreover, they have not demonstrated that they are more affected than the “public at large” by the operation of sections 4903.05 and 4903.8, or that their constitutional challenges, if successful, would directly affect their rights.”

See Also: Hidden Motives on Workers’ Comp

After dismissing the causes of action by the purported injured workers (no doubt added into the mix in an unsuccessful effort to piggyback onto a more sympathetic plaintiff than the medical provider), the court turned to the multiple arguments raised by the medical provider plaintiff.

On the issue of the imposition of a lien filing fee as an impermissible “encumbrance” on the system, the court was unimpressed, noting the plaintiff failed to cite any legal authority as the basis of its assertions. The court pointed out that the courts have rarely been willing to substitute their judgment for the legislature’s in its efforts to create or maintain a system of workers’ compensation. Noting the legislature’s findings regarding workers’ compensation abuse on a broad scale, the court found the imposition of a $150 filing fee to be a rational exercise of legislative authority.

The court then sequentially addressed the additional arguments: right to petition, due process, equal protection and right to contract.  In each argument, the court found the medical lien provider failed to demonstrate a constitutional violation based on the obligation to pay a filing fee. The court was particularly swayed by the fact that the lien claimants could, upon meeting the statutory criterion and prevailing in litigation, recover their fees:

“…The compromise effected by section 4903.05—lien claimants must pay to file their liens, but may recoup their filing fees if they ultimately prevail—sufficiently protects the due process rights of lien claimants while serving the legitimate goal of deterring frivolous filings.”

The court was particularly dismissive of the claim of contractual impairment, as the court noted the contracts that the plaintiff claimed were being impaired had not yet been created. The statutory prohibition on impairing contractual rights essentially prevents the government from changing existing contracts, but it does not extend to future contracts.

The petition requesting an injunction enforcing the lien activation provisions of SB 863 was denied for the medical lien provider and for the injured worker plaintiffs, with respondents to recover their costs.

Comments and Conclusions:

This case had more or less dropped off the radar, particularly since the initial filing by the medical lien provider, Dr. Chorn, The refiled petition was filed directly with the Court of Appeal, the first level of appellate review that can consider constitutional issues. As a result, there really is no factual record to review. The court’s decision rests almost entirely upon statutory interpretation and the court’s conclusions (based on much the same logic as in the Angelotti case) that the legislature has broad discretion. The imposition of a recoverable filing fee turns out to be no more of an impermissible exercise of the legislature’s power than the activation fee.

This case is likely to be appealed to the California Supreme Court, where it is almost just as likely to fail.

Oklahoma

The Pretzel Logic on Oklahoma Option

As a veteran of the worker’s compensation claims trenches, I saw first-hand how the expensive nature of the system drove employers out of business. It sad to see businesses go belly-up, and it was equally sad for the workers who were suddenly unemployed.

It was definitely a case of lose-lose.

One way to combat the high costs of workers’ compensation was to opt out of the traditionally expensive system in states that allowed it. By opting out, employers were forced to be more engaged in the administration of their program and focus more on the outcome.

The result was a less expensive system, providing quality benefits to the injured workers and improving the overall outcome.

Oklahoma was one of the states that seemed to have found the right mix. So I was quite dismayed to learn of the recent decision by the Oklahoma Workers’ Compensation Commission (WCC).

The case, Vasquez v. Dillard’s Inc., involved a worker for Dillard’s who was denied benefits after a work injury that was determined to be an aggravation of a pre-existing injury.

The WCC declared the opt-out portion of the workers’ compensation system unconstitutional because they felt it created a dual system where the injured worker is treated differently.

The most intriguing facet is how the WCC abandoned its traditional administrative role for that of a judiciary in deciding what law is, and is not, constitutional.

That, I suppose, is another story.

However, the WCC completely ignored the already approved opt-out option and remanded the case back to the administrative law judge within the traditional workers’ compensation system.

Not only am I concerned about that sort of pretzel logic, but I also see it as another attack on exclusive remedy.

Right now, my company doesn’t do business in any of the opt-out states. That doesn’t mean we wouldn’t consider it if that option presented itself down the road.

But that is probably on hold as any state considering moving forward with the opt-out system has now been stopped dead in its tracks. Best to sit tight for now.

As for whether the Oklahoma ruling will change what I do with regard to workers’ compensation remains to be seen. As I’m sure many employers will do now, I’ll wait on the sidelines and see how this plays out.

This is basically what I was doing before the Oklahoma ruling … observing from afar to see if the opt-out system (if it came to my states) was not only cost-effective but also fair to the workers.

I would never consider an alternate workers’ compensation system unless I was convinced it offered our injured workers the same, or better, benefits as the traditional system. I would also need to be convinced that it produced better outcomes.

Jurors and Questions on Insurance Coverage

For most potential jurors, questions of insurance coverage do not usually arise in common conversation. Seldom cut and dried, usually subject to numerous definitions and intricacies, coverage issues can be boring and puzzling for even an experienced adjuster. Asking a lay person to try to classify an “occurrence” as defined by a policy, or whether a third party is covered as an additional insured, may prompt, at best, glazed-over eyes or, even worse, a negative commentary about insurance companies. While it may be best in some situations for a judge to determine the issue of insurance coverage, this is not always possible. Sometimes, coverage questions arise in litigation, and those interpreting policy language and determining the outcome are jurors. If jurors are deciding the issues, certain challenges then arise, such as how to clarify policy language, present a clear and concise argument and overcome negative preconceptions about the insurance industry.

Can the Judge Decide Coverage Issues?

In Louisiana, general rules regarding issues that are triable by a jury are set forth in Louisiana Code of Civil Procedure articles 1731 – 1736. These establish the general rule that a demand for a trial by jury will result in a trial by jury of all issues. However, exceptions to the general rule exist when: (a) the parties stipulate that the jury trial shall be as to certain issues only; (b) a party in his demand specifies the issues to be tried by a jury; or (c) the right to trial by jury as to certain issues does not exist. Where a jury trial has been demanded by one or both parties, the case must be tried by a jury unless both parties consent to trial without a jury or the trial court finds that a right to a trial by jury does not exist.

More particularly, La. C.C. P. art. 1562(D) specifically codified the general principle found in La. C.C. P. art. 1736 requiring a stipulation between or the consent of the parties before the trial judge can order that insurance coverage issues be tried separately, with the “court alone” deciding the issue of insurance coverage.

La. C.C.P. art. 1562(D) states:

“If it would simplify the proceedings or would permit a more orderly disposition of the case or otherwise would be in the interest of justice, at any time prior to trial on the merits, the court may order, with the consent of all parties, a separate trial on the issue of insurance coverage, unless a factual dispute that is material to the insurance coverage issue duplicates an issue relative to liability or damages. The issue of insurance coverage shall be decided by the court alone, whether or not there is to be a jury trial on the issue of liability or damages.”

The leading case on the subject is Citgo Petroleum Corp. v. Yeargin, Inc., 95-1574 (La. App. 3 Cir. 7/3/96), 678 So.2d 936, writ granted, remanded, 96-2000 (La. 11/15/96), 682 So.2d 746 and 96-2007 (La. 11/15/96), 682 So.2d 747. There, the court stated that La. C.C.P. art 1562(D) provided that, if principals of judicial efficiency or justice would be served then the court may order a separate trial on the issue of insurance coverage. However, the trial judge’s discretion is not unfettered. The judge’s ability to take the issue away from the jury is severely restricted because, under the article, all of the following conditions must exist: (1) it would simplify the proceedings, permit a more orderly disposition of the case, or be in the interest of justice; (2) the consent of all parties; (3) the non-existence of a factual dispute material to the coverage issue that duplicates an issue relative to liability or damages; and (4) the order must be rendered before trial on the merits.

Therefore, the requirements set forth in the article effectively leave the judge with no discretion, as it requires the consent of all parties. The court further noted that, while the issue of insurance coverage under an insurance policy is a narrow issue of the law between the alleged insured and the insurer, a jury is not prohibited, by statute or otherwise, from deciding this issue. Further, there is no exception to the right to trial by jury for issues that the trial judge may think are too technical or too complex for the jury to understand. Even if the trial judge believes that he is more capable than the jury of deciding the issue of coverage, he cannot take this issue away from the jury once the issue is included within the scope of issues for which a jury trial was requested, unless the conditions of La. C.C.P. art. 1562(D) are met.

As such, if a trial by jury has been requested, but an insurer is presenting technical questions of coverage and believes that a judge would be best suited to decide the coverage issue, a stipulation or the consent of all parties would be necessary before the judge could take the coverage issue away from the jury. Unfortunately, often the consent of all parties to separately try the coverage issue cannot be obtained, and the insurer is left with a jury to decide intricate and potentially costly coverage issues.

Selecting the Best Jury for Your Coverage Case

If coverage issues must be decided by a jury, the persons who make up that jury can make a difference in the outcome of the case. Questioning prospective jurors in voir dire about their current insurance policies and other contracts can provide some insight into how they view insurance companies and the potential for coverage. People often believe that they are “fully covered” under their insurance policies, and that insurers are large, prosperous companies that should be able to “help out” individuals. However, further questioning can reveal that potential jurors do understand that there are limitations as to what is covered under certain policies and what has been negotiated.

Questioning a potential juror about a policy he may currently have in place, whether that policy has a limit and if he understands that the insurance company would not be required to pay more than that limit, can show that the potential juror does understand some limitations to coverage. Additional questions may involve who the current policies provide coverage to and the limitations on that coverage. Even simple, and almost obvious, questions can help illustrate a potential juror’s understanding of coverage limitations. For example, discussing how an automobile policy might provide coverage for certain damage to an owned vehicle but would not cover general maintenance, oil changes or a monthly car payment can help provide insight into whether an individual may be able to understand the issues and be a constructive juror.

Additionally, general questions regarding the potential jurors’ opinion of insurance companies in general, personal claims experiences or inferences regarding insurers that the potential juror has taken from the media can provide insight into whether the potential juror might be favorable or undesirable from the insurer’s standpoint.

Presentation at Trial – Concise and Comprehensible

After a jury has been selected, helping jurors understand and follow the language and logic of the coverage argument is vital. The following tips may help simplify the coverage case and overcome obstacles when faced with presenting coverage issues to a jury.

1. Walk Jurors Through the Basics

Although often complex, insurance policies are simply contracts. They define a relationship between parties and outline who will do what, when and under what circumstances. Presenting the insurance policy as a simple contract, by identifying the promise between the parties and what each may receive in exchange for their promise, may help jurors be less apprehensive when approaching coverage issues.

A good place to start is with the basics of the policy and how it is structured. Discussing the declarations, insuring agreement, exclusions, definitions, conditions and endorsements allows jurors to get comfortable with the policy. After the policy and its purpose are explained, the specific provisions at issue can be addressed. An effective way to do this is by using demonstrative evidence, such as blowups of certain pages or Power Point presentations illustrating specific language and what it means. Presenting the policy through large exhibits helps break down the technicality for jurors and show that it is a logical and consistent contract.

Further, preparing an exhibit naming and listing the experience of all of the individuals who are involved in creating the policy, the claim investigation, adjustment and the coverage decision shows that time and thought of real individuals went into creating a well-organized document and making a well-thought-out coverage decision.

2. Humanize the Issues

Jurors often bring their own experiences to the courtroom and, sometimes, a bad impression of insurance companies. Further, oftentimes coverage disputes are coupled with bad faith claims, exacerbating the notion that insurance companies are malicious. To overcome these perceived notions and prejudices, it is key to humanize the insurer’s operations and show the jurors that real people have drafted the policies and handled the claims. Showing that the insurer is not just a large, faceless corporation, but individuals making decisions and doing their jobs, will help negate the insured’s presented image of an uncaring, profit-seeking business entity. While testimony from a vice president may be impressive, the agent who issued the policy or the adjuster who handled the claim may help put a more relatable face to the company.

Additionally, many insurers have adopted vision statements outlining a code of ethics or a commitment to the community. Using this at trial, and showing how the company is committed to its values or involved in the community, helps dispel negative ideas of an uncaring corporation.

Lastly, insurers should be careful about attacking the insured’s credibility or positions. While it may be necessary, the way this is presented to the jury can have a big impact and can erroneously further the negative ideas about the insurance company.

3. Show All Negotiations

Jurors will generally understand the concept of “you get what you pay for.” They know that if they contracted with their cable company and pay for only the basic channels, they do not get premium channels, such as HBO. It follows that jurors should understand that if underwriting documents or other evidence show what was discussed and understood between the parties, and this is reflected in the contract, this should be what governs. If evidence of negotiations is available, this should be presented to the jury. This concept may be particularly helpful in litigating commercial policies, where there is usually more negotiation, and in showing the application of policy exclusions.

4. Keep It Simple

As a general rule, the simpler the better. It is important to keep the insurance policy language from sounding too technical. Avoid overuse of legal terms and phrases, as this will only confuse jurors and may cause them to fall back on the generally accepted legal principle that “any ambiguity must be construed against the insurer.” A straightforward presentation, relying on only one or two strong coverage arguments, should be used. Presenting every argument possible is not always the best strategy, as this could bog down the jury and cause them to lose focus. When one or two key arguments are made, the case is tight and allows jurors to concentrate on the big picture, rather than trying to follow several moving parts.

Another tactic that may help bring the issues to a comfortable level is to compare the policy to other contracts jurors may have entered into. Outlining the limits and duties imposed by contracts that jurors may be more familiar with, such as a purchase agreement for a car, or a lease agreement for an apartment, may also help jurors realize that there are also limitations and duties imposed by insurance contracts, just like the contracts with which they are more familiar.

Additionally, working backward from the result being sought provides a road map for a streamlined argument and helps create a unifying theme throughout the litigation. Starting from the verdict form or jury instructions helps to keep concentration on the elements that need to be established or explained.

5. Apply Basic Jury Concepts

Basic concepts of persuasion, which apply to all jury litigation, can also be used effectively in a coverage case. Fairness must be stressed and run as a theme throughout the presentation of the coverage case. Jurors want to be fair and will try their best to do so. Additionally, any obvious weaknesses in the case should be addressed. Holes in the case, if not admitted to or explained, will create doubt.

Presenting a coverage case to a jury is sometimes unavoidable, but need not be too difficult or incomprehensible for jurors. Carefully questioning and selecting potential jurors, along with presenting a simple yet logical argument, while humanizing the insurance company, can help achieve a successful presentation of the case in the courtroom and, with that, a successful result.

Key Misunderstanding on Oklahoma Option

Most critics and supporters of the Oklahoma option (OKO) have one thing in common: a misunderstanding about the applicability of the Employee Retirement Income Security Act (ERISA). In part, this misunderstanding is widespread because it hasn’t yet garnered the attention of tax authorities and attorneys, and those of us who aren’t tax attorneys are reluctant to engage this subject because we fear we will be misinterpreted as giving tax advice.

Let me be absolutely clear—nothing in this article should be construed as tax advice, as I am not qualified to offer such advice.

But the ProPublica and NPR journalists who assume ERISA must govern the taxation of OKO benefits simply because it governs the taxation of Texas nonsubscription (TXNS) benefits[1] aren’t qualified, either.

Put simply, ERISA’s governance of OKO workplace injury claims has yet to be demonstrated in any way, and it was certainly not confirmed by rulings in 2015 by two federal judges for the Western District of Oklahoma who considered the jurisdiction of federal courts over OKO-based claims and appeals processes..

There was never any intent in the Oklahoma legislation to have ERISA govern the OKO, and the term “ERISA” never appears—not once!—in the language of the Oklahoma law. Even more importantly, two-and-a-half years after passage, there is zero case law to support any claim that ERISA applies to OKO.

These revelations may be counterintuitive for industry insiders and regulators, but what should be intuitive is that state and federal court systems are in charge of ruling on state and federal laws. Consultants, employers, employees, investigative journalists, insurance carriers, brokers, attorneys, ivory tower experts, doctors and conference debaters don’t get to make such calls. The only ones whose opinions matter are the judges in a position to make these determinations, and the only two judges known to have had the opportunity to consider any issue concerning the relationship between the OKO and ERISA concluded that the judges did not have jurisdiction over cases where the employer sought to have ERISA govern employee appeals of decisions regarding occupational OKO claims.

In April 2015, Judge Joe Heaton of the U.S. District Court for the Western District of Oklahoma issued an order regarding ERISA’s applicability to the occupational accident components of OKO plans in the case of Cavazos v. Harrah Nursing Center (aka Marsh Pointe) that, in part, reads:

“Marsh Pointe alleges … that, pursuant to the Oklahoma [Employee] Injury Benefit Act, it has elected to be exempt from the Administrative Workers’ Compensation Act and become a ‘qualified employer’ by meeting certain requirements including the adoption of a written benefit plan. That well may be. Nonetheless, the case [filed by the plaintiff] arose ‘under the workmen’s compensation laws’ of the State of Oklahoma. As such, it may not be removed to any district court of the United States.”

Judge Heaton’s ruling was a narrow one, aimed only at determining whether the federal court could exercise jurisdiction over the case before it. That case had been removed by the employer to federal court from the Oklahoma Workers’ Compensation Commission (OWCC), based on the assertion that ERISA ought to govern the employee’s pursuit of a claim against her employer’s OKO plan. The court held that, regardless of whether ERISA applied to certain aspects of the OKO plan, the employee’s claim arose under Oklahoma’s WC laws and, therefore, a specific federal jurisdictional statute (28 USC §1445(c)) prevented removal of the case to federal court. Judge Heaton sent the matter back to the OWCC, and his order made it crystal clear that such cases cannot be removed to the federal court system.[2] In other words, ERISA (a federal law) does not give federal courts jurisdiction over the occupational accident claims of employees whose injury benefit plans are governed by the OKO (a state law)—no matter how frequently ERISA is referred to in an employer’s benefit plan and regardless of whether ERISA applies to other aspects of that benefit plan.

The Cavazos case was the first real opportunity we had to see whether removal of such claims to the federal courts was possible. Then, in September, Judge Stephen Friot (from the same Western District Court of Oklahoma) followed Heaton’s logic in Vasquez v. Dillards, our second opportunity to see whether federal court involvement in the OKO claims process was available. The decision read:

“The court concludes that the [Oklahoma Employee Injury Benefit Act] is part of Oklahoma’s statutory scheme governing occupational injuries and workplace liability; in other words, the OEIBA is part of Oklahoma’s statutory scheme governing workmen’s compensation.”

The case before Judge Friot was a bit different procedurally, but it came to the same result. In the Vasquez case, the employee received an adverse decision from her employer regarding her claim for benefits under the employer’s OKO plan. She then sought review by the OWCC as provided for in the Oklahoma statute. The employer removed the case to federal court, contending that the company’s plan was governed by ERISA and, therefore, that ERISA pre-empted state law on the issue and that the federal court had exclusive jurisdiction. The employee moved to remand the case to the OWCC. Judge Friot sided with the employee and remanded the case, which was to be expected post-Cavazos. The ruling in Vasquez (which features a more detailed discussion than the one provided by Judge Heaton in Cavazos) concludes that 28 USC §1445(c) (the same jurisdictional statute relied upon by Judge Heaton) barred removal of the case to the federal court, even if, as Judge Friot specifically presumed for purposes of his ruling, the “plan under which [the employee files] claims may be … an ERISA plan.”

The explicit—and antiquated—language from the 1974 ERISA law indicates that ERISA doesn’t apply to “workmen’s compensation.” ERISA’s authors recognized a long tradition of federal deference to individual states on workers’ compensation issues. While the OKO is different from traditional workers’ compensation, in the only cases known to address the issue thus far, the federal court system has concluded that it cannot exercise jurisdiction over the on-the-job injury claims of OKO employees.

Die-hard ERISA champions, as it turns out, can cling just as stubbornly to obsolete ideas as can workers’ compensation stakeholders. But OKO supporters don’t need to win such folks over; the law is already on the side of progress. The OKO clearly seeks to stand on its own, and it doesn’t want ERISA as a crutch. Being free from ERISA has advantages beyond tax implications. The OKO clearly sits much closer to traditional workers’ compensation than does TXNS—and, as such, OKO may be regularly accepted as a replacement in the state’s important oil and gas industry. In both Texas and Oklahoma, the larger energy companies almost always require traditional workers’ comp to be held by contracted companies. That won’t change in Texas, but it very well could in Oklahoma. Moreover, these federal court orders should provide solace to the Sooner State because they suggest the oversight and development of this new creation will be the responsibility of Oklahomans.[3]

[1] See “Inside Corporate America’s Campaign to Ditch Workers’ Comp,” an installment in the Insult to Injury series.

[2] The court remanded the case just two days after it was removed without seeking briefs from either party.

[3] To date, all three branches of the Oklahoma state government have actively or tacitly supported the OKO. At worst, the state has adopted a wait-and-see approach to this new alternative. At best, Oklahomans—sans attorneys—are eager to discover whether the incredibly promising early gains made possible through the OKO are sustainable over the long term.

At WorkersCompensationOptions.com, we’re convinced the gains are sustainable. There’s nothing theoretical about our promise of delivering superior care to employees at reduced costs to employers. We’re already doing it in Oklahoma, and we at WCO are proud to be part of this long overdue transformation.

What Is Right Balance for Regulators?

As Iowa’s insurance commissioner, I meet with many innovators whose work affects the insurance industry. A major topic we discuss is the continual debate of innovation vs. regulatory oversight. This debate will be front and center during the Global Insurance Symposium in Des Moines when federal regulators, state regulators, industry leaders and leading innovators come together for discussions on the “right” way to bring innovation into the insurance industry.

I see three schools of thought in the debate:

  • Those who want nothing changed because insurance regulation has worked for more than 150 years
  • Those who suggest oversight by insurance regulators isn’t needed because innovations and market forces don’t require the same type of scrutiny that regulators have performed in the past
  • Those who feel that regulations and oversight are needed but that regulators should move quickly to keep up with emerging technological developments

Innovation is happening, and regulators realize it. No one, including regulators, can stop technological advances. Luckily, I have found that my colleagues who regulate the insurance industry desire to see innovation succeed because it will, generally, enhance the consumer experience. The focus of regulators is to enforce the laws in our states and to protect our consumers. It is that constant focus that ensures a healthy and robust market. And it is that focus that allows the market to work during an insolvency of a carrier, as Iowa witnessed recently during the liquidation of CoOportunity Health.

But wanting to work with innovators doesn’t mean insurance regulators are going to turn a blind eye to how innovations and new technologies within the industry are affecting consumers. I do not believe the fundamentals of the insurance business need to be disrupted. Innovations within an industry that is highly regulated, complex and vital to our economy and nation need to occur within the confines of our regulatory structure. Innovators who are attempting to disrupt the insurance industry outside the bounds of our regulatory structure and who are not following state regulations will likely face significant problems.

So, just as Goldilocks finally found the perfect fit at the home of the three bears, insurance regulators are working diligently to find the perfect fit of the proper regulation to protect consumers for innovations and the technology affecting the insurance industry.   Regulators want the insurance business to continue to innovate and adapt to meet customer needs and expectations. Improving the customer experience through technology, quicker underwriting and increasing efficiency adds to the value of insurance for consumers. I know many smart people are working on creative projects to do these types of things and much more.

The insurance business is arguably becoming less complex because technology simplifies and evens out that complexity. Many existing insurance companies will face challenges as data continues to be harvested and as digital opportunities become more obvious. The continuous innovation in the industry is both positive and exciting.

However, insurance carriers face incredible issues, and, therefore, the regulators who supervise these firms must clearly understand the complexity of the industry and the external factors that weigh upon the industry.

A few issues industry participants must deal with:

  • Perpetual low interest rates that make it difficult for insurers’ investment yields to match up with liabilities;
  • Catastrophic storms that may wipe out an entire year’s underwriting profit in a matter of hours;
  • Increasing technological demands within numerous legacy systems;
  • International regulators working toward capital standards that may not align with the business of insurance in the U.S.

I believe regulators, insurance carriers and innovators can work together to harmonize and streamline regulations in an effort to keep up with market demands. However, the heart of insurance regulation beats to protect consumers. Compromising on financial oversight and strong consumer protections is not up for negotiation. Ensuring companies are properly licensed and producers are trained and licensed is critical, and ensuring companies maintain a strong financial position is equally critical.

Innovators who wish to bear risk for a fee or distribute products to consumers will need to comply with insurance law. Additionally, innovators looking to launch a vertical play into the industry through a creative service, model or underwriting tool need to make sure they do not run afoul of legal rules and provisions that deal with discriminatory pricing and use of data. It is a lot to absorb for an entrepreneur, but it is not impossible, and the upside may very well be worth it.

I absolutely encourage companies looking to innovate in the insurance industry to proceed, but I urge them to do so both with the understanding of insurance law and the role of the regulator and with strong internal compliance and controls. Innovators and entrepreneurs who proceed down the right path are the most likely to have regulators excited to see them succeed.

Insurance is still a complex industry. Can and should it be made simpler? Yes. I believe that, through innovation and continued digital evolution, it will. Should the industry focus on how to continue to enhance consumer experience and put the consumer in the center of everything? Yes, and I know that is occurring within many new ideas and businesses that are beginning and evolving.

Insurance, at its core, is a business of promises. It is an industry that has passed the test of time, and I believe, through innovation and continual improvement, it will remain strong and vibrant for the next 100 years.

If you are an innovator or entrepreneur and are looking for a program to learn about how to address insurance regulatory issues within your business as well as the role of a state insurance regulator, I would again encourage you to attend our 3rd Global Insurance Symposium in Des Moines, Iowa. This is the first conference where innovation and regulatory issues truly converge. This is your opportunity to learn from state insurance regulators, the Federal Reserve, the U.S. Department of Commerce, seasoned insurance executives, start-up entrepreneurs (the second class of the Global Insurance Accelerator will have a demo day for the 2016 class), venture capital investors and leading innovative thought leaders. No other meeting has assembled a group like this.

Everyone will benefit from the unique learning experiences, and, more importantly, relationships will emerge. Register here today!