CCS/SS/SCS/HCS/HB 577 - This act modifies several provisions relating to the regulation of insurance. Several of these provisions may also be found in the truly agreed to version of CCS/HCS/SB 464 (2009).TAXATION OF INSURANCE COMPANIES - Under current law, insurance companies which pay an annual tax on gross premium receipts are exempt from the imposition of Missouri's corporate income and franchise taxes. This act specifies that insurance companies subject to an annual tax on gross premium receipts are exempt from the imposition of Missouri's corporate income and franchise taxes. These provisions were originally in SB 280 (2009)(Sections 143.441, 147.010, and 148.370).
MOTOR VEHICLE LIABILITY INSURANCE CARD FRAUD - Under this act, any person who intentionally produces, manufactures, sells, or otherwise distributes a fraudulent document intended to serve as an insurance identification card is guilty of a Class D felony. The act further provides that any person who knowingly or intentionally possesses a fraudulent document intended to serve as an insurance identification card is guilty of a Class B misdemeanor. This provision was originally contained in SB 16 (2009)(Section 303.024).
CONTINUING EDUCATION COURSES FOR PRODUCERS - This act clarifies the continuing educational requirement statute for insurance producers. Under the act, a course of instruction sponsored by an entity engaged in the business of providing education courses to producers is recognized as a qualified continuing education course (Section 375.020).
FINANCIAL REPORTING MODEL REGULATION - This act amends Missouri's annual financial reporting laws to correspond with the NAIC Annual Financial Reporting Model Regulation. In the act's main provisions, the legislative proposal requires insurers to be governed by an audit committee with respect to annual audit reports; prohibits certain CPA non-audit services; requires CPA audit partner rotation every 5 years; requires a "cooling off" period before CPA auditors can be hired by insurance clients; requires audit committee preapproval of all audit and nonaudit services provided by CPA firms; and institutes certain internal control requirements over financial reporting to ensure the reliability of financial statements that are reported to the Department of Insurance.
The act exempts insurers having direct premiums written in this state less than $1,000,000 in any calendar year and less than 1,000 policyholders of direct written policies nationwide at the end of the calendar year from the purview of the act. The exemption does not apply if the director makes a finding that compliance with the act is necessary to carry out statutory responsibilities. The exemption also does not apply to insurers having assumed premiums pursuant to contracts of reinsurance of $1,000,000 or more (Section 375.1028).
Foreign or alien insurers that are required to file management's reports of internal control over financial reporting in another state are exempt from filing such reports in Missouri if the other state has similar reporting requirements as Missouri and such reports are filed with their departments of insurance.
The act requires requests for extensions for filing an annual audit report to be submitted in writing not less than 10 days prior to its filing due date. The current law allows requests to be made within 20 days of the due date. The act also provides for an extension for filing a management's report of internal control over financial reporting.
Every insurer required to file an audited financial report shall also be required to have an audit committee that is directly responsible for the appointment, oversight and compensation of any accountant the auditor (Section 375.1030).
Under the act, the director shall not recognize any person or firm as a qualified independent certified public accountant if that person or firm has either directly or indirectly entered into an indemnification with respect to the audit of the insurer. The lead or coordinating audit partner having primary responsibility over an audit may not act in that capacity for more than 5 consecutive years and may not rejoin in that capacity for a period more than five years. Under current law, the requirement is 7 and 2 years respectively. Under the act, a qualified independent certified public accountant may enter into an agreement with an insurer to have disputes relating to an audit resolved by mediation or arbitration.
Under the act, the director shall not accept an annual audited financial report, prepared in whole or in part by an accountant who functions in the role of management, audits his or her own work, or serves in an advocacy role for the insurer. The act also prohibits the director from recognizing as qualified independent certified public accountants or accepting annual audited financial reports prepared by accountants who provide to insurers, contemporaneously with the audits, certain non-audit services, such as bookkeeping services, appraisal or valuation services, human resources services, internal audit outsourcing services, investment services, legal services unrelated to the audit, or other impermissible services determined by the director. Insurers with less than $100,000,000 in direct and assumed premiums may request a waiver from this requirement based on financial or organizational hardship.
A qualified independent certified public accountant who performs the audit may engage in other nonaudit services, including tax services, that do not conflict with the previously described services, only if the activity is approved in advance by the audit committee, in accordance with the act.
All auditing and nonaudit services provided to an insurer by the qualified independent certified public accountant must be preapproved by the audit committee. The preapproval requirement is waived for nonaudit services if the insurer is a SOX compliant entity or meets other requirements outlined in the act.
Partners and senior managers of the audit engagement may not serve as a member of the board of directors, president, chief executive officer, controller, chief financial officer or other similar position of the insurer if employed by the independent public accounting firm that audited the insurer during the one-year period which preceded the most current statutory opinion (Section 375.1037).
The act repeals the requirement that an accountant provide an insurer evidence that the accountant has liability insurance in the lesser amount of $1,000,000 or 10% of the insurer's admitted assets (Section 375.1040).
The act requires insurers to furnish the director with written communication as to any unremediated material weaknesses in its internal control over financial reporting noted during the audit. The act outlines the procedure the accountant must follow in preparing the written communication. The insurer must also provide with its annual audited financial report a description of the remedial actions taken or proposed to correct unremediated material weaknesses (Section 375.1047).
The act requires audit committees to be directly responsible for the appointment, compensation, and oversight of the work of any accountant for the purpose of preparing or issuing the audited financial report required by the act. The act sets forth membership requirements for the audit committee and establishes certain conflict of interest and independence requirements so that the member of the audit committee may be considered independent. Under the act, based on various premium thresholds, a certain percentage of the audit committee members must be independent from the insurer. However, if domiciliary law requires board participation by otherwise non-independent members, such law shall prevail and such members may participate in the audit committee (subsection 8 of Section 375.1053). Under the act, insurers with less than $500 million in direct and assumed premiums may apply for a waiver from the audit committee requirements based on hardship (subsection 9 of Section 375.1053).
Under the terms of the act, no director or officer of an insurer shall make false or misleading statements to an accountant in connection with any audit, review or communication required under the act. In addition, no officer or director of an insurer, or any other person acting under the direction thereof, shall take any action to coerce, manipulate, mislead, or fraudulently influence any accountant engaged in the performance of an audit if that person knew or should have known that the action, if successful, could result in rendering the insurer's financial statements materially misleading (Section 375.1054).
Under the act, the management of insurance companies with $500,000,000 or more in direct or assumed annual premiums must file a report with the Department of Insurance regarding its assessment of internal control over financial reporting (known as a management's report of internal control over financial reporting). The report shall include a statement by management officials whether these controls are effective to provide reasonable assurance regarding the reliability of the statutory financial statements and disclosure of any unremediated material weaknesses in internal control over financial reporting. The act establishes what the management's report of internal control over financial reporting must include (Section 375.1056).
TRAVEL DISCRIMINATION UNDER LIFE INSURANCE POLICIES - Under this act, no life insurance company shall deny or refuse to accept an application for life insurance, refuse to renew, cancel, restrict, or otherwise terminate a policy of life insurance, or charge a different rate for the same life insurance coverage, based upon the applicant's or insured's past or future lawful travel destinations. Nothing in this act shall prohibit a life insurance company from denying an application for life insurance, or charging a different premium or rate for such coverage under such policy based on a specific travel destination where the denial or rate differential is based upon sound actuarial principles or is related to actual or reasonably anticipated experience. Under the act, a violation constitutes an unfair trade practice. The act provides that it shall apply to life insurance policies issued or renewed on or after August 28, 2009. This provision of the act is similar to a version found in the truly agreed to version of SB 464 (2009) and the truly agreed to version of SB 126 (2009)(Section 376.502).
CAPTIVE INSURANCE COMPANIES - This act modifies various provisions of Missouri's captive insurance company law. Under this act, the definition of "association" is amended to include captive insurance companies formed as reciprocal insurers. The act amends multiple sections of the captive insurance law to permit reciprocal insurers to be used to form an association captive.
This act repeals the requirement that a captive insurance company must hold at least 35% of its assets within Missouri (Section 379.1302). The act expressly provides that association captive insurance companies and industrial insured captive insurance companies may be organized as reciprocal insurers as provided by law. The act provides that the organizers of a reciprocal insurer must petition the director for its formation. The act provide that the captive insurance company statutes shall control in cases of conflict between them and the reciprocal insurance statues. The act further modifies the law to permit a non-U.S. or alien captive to redomesticate to Missouri if approved by the director (Section 379.1310).
Under the terms of the act, the premium taxes imposed on captive insurance companies are redirected. Under the act, 10% of the taxes are credited to the Insurance Dedicated Fund, subject to a maximum of 3% of the current fiscal year's appropriation from such fund, with the remainder to be deposited in the general revenue fund (Sections 379.1326 and 379.1332). The act contains a similar provision for the disposition of premium taxes assessed on special purpose life insurance captive companies (Section 379.1412).
Under the act, an association captive insurance company or an industrial insured captive insurance company may be converted into or merged with and into a reciprocal insurer. Under the act, any conversion or merger must provide a fair and equitable plan for purchasing the interests of the stockholders and policyholders of the stock or mutual insurer. The act sets forth the statutory steps that must be followed in order to complete a conversion or a merger (Section 379.1339).
This act reduces the number of Missouri residents required to incorporate or organize a special purpose life reinsurance captive from two to one (Section 379.1373).
The act modifies the method in which the assets of a special purpose life reinsurance captive are valued. The act allows letters of credit, financial guarantee policies and surety bonds to be recognized as assets of a special life reinsurance captive regardless of the existence of any repayment obligations imposed upon the captive (Section 379.1388).
The captive insurance provisions may also be found in SB 269 (2009).
INSURANCE HOLDING COMPANIES - This act amends the terminology of the state's holding company law in Chapter 382, to use the term "producer" rather than the term "broker" (Sections 382.400 to 382.409).
SURPLUS LINES INSURANCE - This act allows the department to publish notices regarding surplus lines insurance companies on a website rather than mailing notices to each surplus lines licensee (Section 384.025). The act requires the biennial renewal of a surplus lines license rather than having it renewed on an annual basis. The biennial renewal fee is $100 (currently the renewal fee is $50 for an annual license) (Section 384.043). This act transfers the collection of surplus lines taxes directly to the Department of Revenue in order to comply with Executive Order 07-06. Current law reflects a system in which tax funds are collected by DFIP and then are remitted to the Department of Revenue (Section 384.051). Under this act, surplus lines brokers are required to report the gross amounts charged for surplus lines insurance with respect to risks located within this state, exclusive of sums collected for the payment of federal, state, or local taxes and the amount of net premiums with respect to the insurance (Section 384.057). The act repeals a provision of law that requires the director of the Department of Insurance to personally report to certain legislative committees of all actions initiated, maintained and concluded by the director (Section 374.456). Under current law, each surplus lines licensee must file a written report with the director within 30 days of placing surplus lines insurance describing the surplus lines insurance transaction. This act repeals this provision (Section 384.031).
INTERSTATE INSURANCE PRODUCT REGULATION COMPACT - This act creates the Interstate Insurance Product Regulation Compact.
The act provides for the promotion and protection of the interests of consumers of individual and group annuity, life insurance, disability income, and long-term care insurance products. The act creates the Interstate Insurance Product Regulation Commission to develop uniform standards for insurance products covered under the Compact, to establish a central clearing house to receive and provide prompt review of insurance products covered under the Compact, to provide appropriate regulatory approval, and to improve coordination of regulatory resources and expertise between state insurance departments. The Interstate Product Regulation Compact establishes a mechanism for developing uniform national product standards for life insurance, annuities, disability income insurance, and long-term care insurance products. It also creates a single point to file products for regulatory review and, if necessary, approval. In the event of approval, an insurer would be able to sell its products in multiple states without separate filings in each state.
The act provides the statutory framework for states to enter into an interstate insurance product regulation compact. The Compact would establish a single point of filing for certain insurance products and rate filings which would be subject to uniform national standards. Those states that are members of the Compact would develop the uniform standards that apply to products filed with the Commission. Product standards would be developed through a rulemaking process which would require the approval of two-thirds of the commission management committee and two-thirds of the commission members. Unless a state opts-out, approval of a product by the Compact would be the same as approval by a member state. The act would, however, allow companies the option to continue to file products in the individual states through the existing form filing processes.
The act also provides that individual states will continue to regulate market activities and allow for coordination among states and the Commission to determine instances of violations of uniform standards subject to the final order of the Commission. If a state disagrees with a product standard developed by the Commission, it may opt-out of the uniform standard either by regulation or legislation. For long-term care insurance, states may opt-out at the time of joining the Compact. In order to opt-out by regulation, a state must show that the uniform standard does not provide reasonable protections to the citizens of the state and that the needs of the state outweigh the legislature's intent to participate in and receive the benefits of the Compact. The Compact would become effective when two states enact compact legislation. The Commission becomes operational if twenty-six states or states representing forty percent of the premium for life, annuities, disability income insurance and long-term care join the Compact. Operations of the Commission would be financed initially through contributions and other sources of funding and over time through the filing fees paid by insurers. All states joining the Compact would be involved in setting up and overseeing the activities of the Compact, including developing product standards and the rules and operating procedures of the Commission. The Commission would make an annual report to the Legislature and Governor of each state joining the Compact. In addition to opting out of particular product standards, each state has the right to withdraw from the Compact, by enacting a statute repealing this act.
This portion of the act is identical to SCS/SB 783 (2008) and substantially similar to SB 304 (2007) and SB 1071 (2006) (sections 374.350 to 374.352).
BAIL BOND INDUSTRY STUDY - This act requires the Department of Insurance to conduct a study on the bail bond industry and issue a report to the insurance committees of the General Assembly by January 6, 2009 (Section 374.776).
LIMITATION ON COPAYMENTS - Under this amendment, health carriers, including preferred provider organizations, independent physician associations, and other entities that contract with health care providers, shall not impose any co-payment that exceeds 50% of the total cost of providing any single health care service to its enrollees (Section 376.391). This provision is contained in SB 283 (2009)(SENATE AMENDMENT 4).
MANDATED OFFERING OF INSURANCE COVERAGE FOR PROSTHETIC DEVICES - This act requires health carriers to offer coverage for prosthetic devices and services (Section 376.1232)(SENATE AMENDMENT 5).
MO HEALTHNET DATA TRANSPARENCY PROGRAM - This act requires the MO HealthNet Division, by August 28, 2010, to implement a program to make available through its Internet web site nonaggregated data on MO HealthNet participants collected under the federal Medicaid Statistical Information System to the extent such data has already been de-identified in accordance with federal HIPAA privacy requirements. In implementing the program the Division shall ensure that the information made available is in a format that is easily accessible, useable, and understandable to the public, including individuals interested in improving the quality of care provided to individuals eligible for programs and services under the MO HealthNet program, researchers, health care providers, and individuals interested in reducing the prevalence of waste and fraud under the program. By August 28, 2011, and annually thereafter, the director shall submit to the General Assembly and the MO HealthNet oversight committee, a report on the progress of the program, including the extent to which information made available through the program is accessed and the extent to which comments received on the program were used during the year to improve the utility of the program. The Division shall also report to the General Assembly the feasibility of expanding the transparency program for the health care for uninsured children program (SCHIP). This program has a six-year sunset clause. This provision is identical to a portion of SCS/SB 549 (2009) and SS/SCS/SB 306 (2009)(Section 208.192)(SENATE AMENDMENT 6).
STEPHEN WITTE