PROPOSED RULEMAKING
[31 PA. CODE CH. 137]
Miscellaneous
[27 Pa.B. 1850] The Insurance Department (Department) proposes to delete Chapter 137 (relating to miscellaneous) to read as set forth in Annex A, under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412). Chapter 137 was previously promulgated under sections 213, 214 and 216 of The Insurance Department Act of 1921 (40 P. S. §§ 51, 52 and 54) (now repealed); the act of June 5, 1947 (P. L. 445, No. 202) (40 P. S. §§ 1151--1162) (now repealed); and The Casualty and Surety Rate Act (40 P. S. §§ 1181--1199).
Purpose
The purpose of this rulemaking is to delete Chapter 137 to eliminate obsolete regulations. The regulations, adopted in 1971, imposed several requirements on insurance companies licensed to do business in this Commonwealth. The regulations required companies to provide the Department with reports on unsafe products, to provide notification of internal consumer affairs programs and to practice honest advertising of insurance products. What follows is a description of the three sections of Chapter 137 and the reasons for the deletion of this chapter in its entirety.
Section 137.1 is presently a reserved section and will remain the same.
Section 137.2 (relating to report on unsafe products) requires insurers to report to the Department every 6 months on unsafe products as revealed by their claims data. The Department has determined that this information is not essential, the requirement has not been enforced and statutory authority already exists to request this information, if necessary. See 40 P. S. §§ 323.1--324.13. In addition, the requirement regarding unsafe products duplicates information required to be supplied by manufacturers, retailers and distributors to the Consumer Products Safety Commission of the Federal Government and, thus, need not be routinely collected by an insurance regulator.
Section 137.3 (relating to consumer affairs programs) requires insurance companies to establish a program to handle consumer complaints and to notify the Department of the corporate officer in charge. Further, the section requires that the program be structured to provide policyholders with access to a high level executive who reports directly to the board of directors of the company. The Department already monitors insurers' handling of consumer complaints through its market conduct examinations and requires compliance with the Unfair Insurance Practices Act (40 P. S. §§ 1171.1--1171.15) (UIPA) and companion regulations, in Chapter 146 (relating to unfair insurance practices).
Section 137.4 (relating to advertising practices) requires insurers to advertise in an honest manner. This is already a requirement of, and is enforced through, section 5 of the UIPA (40 P. S. § 1171.5). Further, advertising is the subject of Chapter 51 (relating to advertising provisions).
Comments regarding the deletion of these regulations were solicited from the various trade associations representing the insurance industry. Comments were received from the American Insurance Association and the Insurance Federation of Pennsylvania, Inc. Both of these organizations were in agreement with the Department that the regulations are obsolete and serve no purpose. Comments were also received from Pennsylvania Blue Shield recommending that the sections of Chapter 137 be editorially amended if the chapter is not deleted.
Fiscal Impact
The Department estimates that 4 to 5 million claims are reviewed by Pennsylvania insurers annually. The cost of reviewing these claims for the purpose of identifying unsafe products, as well as the cost of developing a system for retrieving and reporting this information, would exceed $5 million annually. Therefore, the approximate savings of this deletion is estimated to be $5 million on an annual basis.
Paperwork
The deletion of these sections will decrease paperwork requirements for the affected parties in that the deletion eliminates unnecessary reporting requirements for the insurance industry.
Affected Parties
The deletion of these sections will affect insurers who are licensed to sell insurance in this Commonwealth.
Effectiveness/Sunset Date
The rulemaking will become effective upon final publication in the Pennsylvania Bulletin. Because the rulemaking proposes to delete obsolete regulations, no sunset date has been assigned.
Contact Person
Questions or comments regarding this proposed rulemaking may be addressed in writing to Diana Donovan, Special Assistant, Office of Special Projects, Insurance Department, 1326 Strawberry Square, Harrisburg, PA 17120, (717) 787-4429, within 30 days of the publication of this notice in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on March 28, 1997, the Department submitted a copy of this proposed rulemaking to the Independent Regulatory Review Commission (IRRC), the Chairpersons of the House Insurance Committee and the Senate Banking and Insurance Committee. In addition to submitting this proposal, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1. A copy of the material is available to the public upon request.
If IRRC has objections to any portion of the proposed rulemaking, it will notify the Department within 30 days of the close of the public comment period. The notification shall specify the regulatory review criteria that have not been met by that portion. The Regulatory Review Act specifies detailed procedures for the Department, the Governor and the General Assembly to review these objections before final publication of the proposal.
LINDA S. KAISER,
Insurance CommissionerFiscal Note: 11-141. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 31. INSURANCE
PART VII. PROPERTY, FIRE AND CASUALTY INSURANCE
CHAPTER 137. [MISCELLANEOUS] (Reserved). § 137.2. [Report on unsafe products] (Reserved).
[The insurance industry's extensive data on unsafe and hazardous products shall be made available for analysis and disclosure to the public. Each insurer shall therefore submit to the Insurance Department, prior to January 31 and July 31 of each year, a report on unsafe products and products unreasonably prone to damage, as revealed by the claims and underwriting files of the company, and any other related files or studies undertaken during the 6 months previous to the reporting date. The reports should set forth relevant information including the brand names of the products in question.]
§ 137.3. [Consumer affairs programs] (Reserved).
[The prompt and equitable handling of consumer complaints and claims is an essential duty of insurance companies. Insurers which have not already undertaken the formation of a special department or designated a corporate officer for this purpose should do so prior to December 31, 1971. Each program should be structured to provide policyholders with access to a high level executive in the company who reports directly to the board of directors. The Insurance Department should be notified promptly upon the implementation of this program and advised in detail of the manner in which it is intended to function.]
§ 137.4. [Advertising practices] (Reserved).
[The advertising programs of many insurers do not reflect their actual underwriting policies. Advertising which gives the impression that a company is soliciting and serving a broad spectrum of policyholders at preferred rates, if the company is in fact accepting business only from a small and select segment of the insurance market or on a restricted basis, is misleading. The advertising practices of an insurer shall therefore be consistent with its actual underwriting practices and the Insurance Department will exert every effort to protect the insurance-buying public from misinformation.]
[Pa.B. Doc. No. 97-560. Filed for public inspection April 11, 1997, 9:00 a.m.]
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