Department of Insurance

Statutory Authority: 18 Delaware Code, Sections 310, 311, 2301 et seq. and 2501 et seq.

(18 Del.C. §§310, 311, 2031 et seq and 2501 et seq)

18 DE Admin. Code 907

FINAL

ORDER

907 Records Relating To Consumer Complaints

A public hearing was held on September 6, 2005 to receive comments on proposed Regulation 907 relating to establishing a method by which founded consumer complaints against an insurer can be recorded, tracked in the Department of Insurance and such records be made available to the public. Public notice of the hearings and publication of proposed Regulation 907 in the Register of Regulations and two newspapers of general circulation was in conformity with Delaware law. Twenty-one persons attended the public hearing. Written comments were received into the record from four persons or entities in favor of the proposed regulation and from nine persons critical of the proposed regulation. The oral statements made at the hearing were transcribed as required by law.

Summary of the Evidence and Information Submitted

The proposed regulation was promulgated to provide a method whereby the Department could, on a predictable basis, identify founded complaints (as that term is defined in the regulation) and make that information readily available to the public. The written comments and persons in favor of the regulation noted that such information would be important to the consumers to allow them to make informed choices about their insurance coverage.

The insurers were supportive of public accessibility to properly identified statistical information but felt that the proposed regulation was not sufficiently clear to accomplish its stated goal. The concerns included the lack of a precise definition of a founded complaint, the treatment of legitimate disputes, the negative incentive to mediate issues with customers, and the conflict with other regulations designed to resolve consumer issues such as Regulation 901. Of the nine comments received from insurance companies or trade organizations, four were from health insurers (one of which was from a trade organization representing health insurers) that were specifically concerned about the relationship of the proposed regulation to the pre-existing commitment to arbitration under the Patient Bill of Rights as embodied in Regulation 1301.

Findings of Fact

Under the Delaware Freedom of Information Act, the Department of Insurance would be obligated by law to provide public access to public records not exempted by law which would include the results of cases arbitrated under any law or regulation including Regulations 901 and 1301 (except for the disclosure of personal health or financial information). As a general matter, I have the authority to compile and publish statistical information on both general and specific matters that come before the Department. See generally, for example, 18 Del.C. §314(b) relating to the public inspection of the records of the Department and 18 Del.C. §321(f) relating to the discretionary authority to release examination information to the public and 18 Del.C. §310(b) the authority reasonably implied from Title 18 of the Delaware Code.

Members of the public generally and the insurance consumer in particular have a vested interest in having that information available that will allow the consumer to make an informed and knowledgeable decision about insurance coverage. The consumer is entitled to know not only the costs and coverage limits of insurance but the insurer’s “track record” as it relates to claims handling and payment. This regulation merely takes an inherent right of the Commissioner and creates a standardized methodology to minimize the potentially harmful consequences that concern the insurers when it comes to publicizing information related to their performance. In that regard, the regulation creates a very discrete category of founded complaints so that complaints upon which there is a good faith basis for the insurer to contest and which ultimately get resolved are not subject to inclusion in the founded complaint computation. As a further protection for all involved, a contested claim is referred for a hearing with all of the Title 18 Chapter 3 protections before the complaint can be considered founded.

The issue of whether a complaint is founded is mutually exclusive of a proceeding for arbitration under Regulation 901 or 1301. If a complaint is not resolved under sections 6.1-6.3 of the regulation and goes to arbitration, there is no double penalty since the question of whether the complaint is founded bears no statistical relationship to the resolution of the complaint through arbitration. Even though a health arbitration may track differently because it arises under an internal review process required by 18 Del.C. §332 it still comes into the Department as the result of a complaint. A proceeding under this regulation is not established for the purpose of individual consumer relief. It is designed to track how insurers handle complaints which is a policy matter that is not substantively opposed by the insurers.

Decision and Order

Based on the provisions of 18 Del.C. §§310, 311, 2301 et seq. and 2501 et seq. and the record in this docket, I hereby adopt Regulation 907 to be effective on October 11, 2005.

Text and Citation

The text of the proposed amendments to Regulation 907 last appeared in the Register of Regulations Vol. 9, Issue 2, pages 197-9, August 1, 2005.

IT IS SO ORDERED this 14th day of September, 2005.

Matthew Denn, Insurance Commissioner

907 Records Relating To Consumer Complaints

1.0 Authority

This regulation is adopted by the Commissioner pursuant to the authority granted by 18 Del.C. §§310, 311, 2301 et. seq. and 2501 et. seq., and promulgated in accordance with the Delaware Administrative Procedures Act, 29 Del.C. Chapter 101.

2.0 Scope

Except as indicated herein, this regulation applies to all complaints relating to insurance, as defined below.

3.0 Definitions

“Complaint” shall mean any expression of a grievance against an insurer made in any form to the Delaware Department of Insurance. An allegation of insurance fraud, as defined at 18 Del.C. §2407, shall be treated pursuant to procedures authorized under 18 Del.C. Chapter 24 of the Delaware Code and shall not be considered a complaint for purposes of this regulation. Statements that contain allegations of insurance fraud as well as complaints that would not, if true, constitute insurance fraud shall be treated in relevant part according to 18 Del.C. Chapter 24 and this regulation.

“Department” means the Delaware Department of Insurance.

“Founded,” with respect to a complaint, means:

• that the insurer’s act, acts, omission, or omissions did not comply with a provision of Title 18 of the Delaware Code, regulations promulgated by the Department, or other applicable Delaware statute or regulation; or

• that the insurer’s act, acts, omission, or omissions contravened or were inconsistent with a rate filing, form filing, or other filing made with the Department; or

• that the insurer’s act, acts, omission, or omissions contravened or were inconsistent with a provision or provisions of the agreement to which the individual making the complaint was a party or third party beneficiary; or

• that the insurer’s act, acts, omission, or omissions contravened or were inconsistent with formal standards or practices of the insurer which were relied upon by the insurer in satisfying the requirements any examination conducted by the Department , alone or in conjunction with the Insurance Departments of other states.

“Insurance” shall have the meaning assigned to it at 18 Del.C. §102(2).

“Insurer” shall have the meaning assigned to it at 18 Del.C. §102(3).

4.0 Tracking of Complaints

It is the policy of the Department that Delaware consumers should be aware of the volume and type of founded complaints that have been resolved against insurers with whom they do business or are contemplating doing business under the provisions of this regulation.

5.0 Intake of Complaints

Any communication with the Department that constitutes a complaint shall be formally recorded as such by the Department, assigned an identifying number, and tracked until it is resolved through one of the methods described in Section 6.0.

6.0 Resolution of Complaints

Complaints shall be resolved in one of the following manners:

6.1 Complaints Lacking Merit. The Department may determine that the complaint did not have merit in which case it shall not be deemed to be founded.

6.2 Resolved In Favor of Consumer. The Department, through negotiation or mediation, may resolve a complaint, absent any formal proceeding, with some benefit accruing to the consumer. Any resolution in favor of the consumer shall be considered a complaint resolved in favor of the consumer.

6.3 Referral for Formal Process. The Department may initiate a proceeding to make a formal determination as to whether the complaint is founded. The Department shall provide a 60 day written notice to the insurer that the complaint has been received and that the complaint will be referred for a formal determination under section 7.0 of this regulation unless the complaint is otherwise resolved within 60 days. Absent a notice from the insurer that the complaint is not subject to informal resolution within 60 days from the time the insurer receives notice of the complaint, the Department will proceed to resolve the complaint formally or informally, in its discretion after the 60 day period without further notice to the insurer. If, within the 60 day notice period, the insurer notifies the Department that the matter is not subject to resolution, such notice shall be a waiver of the balance of the notice period and the Department can proceed to a formal determination. Any resolution in favor of the consumer shall be considered founded complaint. At any time after notice or before the conclusion of a formal proceeding, the parties shall have the right to resolve the complaint informally under sections 6.1 and 6.2 of this regulation.

6.4 Other. The Department shall classify complaints resolved in a manner other than those listed in subsections 6.1 through 6.3 as “other” in which case the complaint will not be considered founded.

7.0 Formal Determinations

If the Department initiates a proceeding to determine whether a complaint is founded, it shall follow the procedures outlined in 18 Del.C. §§323 through 329, and, where consistent with those sections, shall also treat that proceeding as a case decision under 29 Del.C. Chapter 101. A complaint may be resolved in favor of a consumer after a formal proceeding is initiated. This Regulation shall not prohibit the Commissioner from taking any action otherwise permitted by the Delaware Code on behalf of a consumer or consumers related to a complaint prior to the completion of formal proceedings.

8.0 Publication of Findings

The Department shall make available to the public the following information:

8.1 The details of each founded complaint and action taken by the Insurance Department in response thereto, with information related to the identify of the complaining party deleted;

8.2 Statistical information regarding the number of founded complaints against each insurer licensed to do business in the State of Delaware, including information permitting consumers to assess such statistics in the context of the total amount of business done in the state by each insurer.

9.0 Severability

If any provision of this Regulation or the application of any such provision to and person or circumstance shall be held invalid the remainder of such provisions, and the application of such provision to any person or circumstance other than those as to which it is held invalid, shall not be affected.

10.0 Prior Bulletins and Regulations

This Regulation shall supersede any prior bulletin or regulation of the Department to the extent that such bulletin or regulation is inconsistent with the provisions of this Regulation.

11.0 Inconsistent Statutes

This regulation shall not apply to any type of complaint that the Department is expressly required by the Delaware Code to treat in a manner inconsistent with this regulation.

12.0 Effective Date

This Regulation shall become effective October 11, 2005, and information shall be made public pursuant to Section 8.0 commencing January 1, 2006.

9 DE Reg. 595 (10/01/05)(Final)