Action, legislation, and investigations into “patriot penalties”

Delaware Insurance Commissioner Trinidad Navarro responded strongly to a Consumer Federation of America report that Delaware service members may return home from deployment to increased auto insurance premiums, calling the practice completely unacceptable and issuing a formal bulletin to insurance companies about the illegality of this practice in Delaware. Commissioner Navarro plans to work with the General Assembly to expand protections from the “patriot penalty.”

“Service members and their families deserve to be treated like the heroes they are, returning home to gratitude and respect, not financial penalties,” said Commissioner Trinidad Navarro. “If a member of the military terminates their auto insurance because they are serving away from home and no longer using a personal vehicle – whether in another state, another country, or in international waters – they are making a personal financial decision that should not increase their auto insurance rates in the future.”

Last week, the Consumer Federation of America distributed a letter to Insurance Commissioners, detailing an investigative report that shows that service members who incur a lapse in coverage due to deployment are later charged higher premiums, even when the company is aware that the lapse is due to deployment. While the department is not aware of specific residents experiencing this issue, report indicated that Delawareans returning from deployment may be facing these increased costs, prompting a passionate response from Commissioner Navarro.

“It is absolutely outrageous and unacceptable to allow any insurer to charge a higher premium to a member of the military solely because they didn’t maintain insurance coverage when they were sent abroad to serve,” said consumer advocate Doug Heller, an insurance expert for Consumer Federation of America. “We thank Commissioner Navarro for being so quick to stand up for servicemembers and do whatever it takes to ensure that no company charges a Patriot Penalty in Delaware. We hope other Commissioners will follow his lead.”

Delaware banned this practice in 2008 after a resident who served in Iraq for more than a year experienced a premium increase upon return, extending the protection to spouses that accompany a service member in overseas service as well. Currently, the law is only applicable to deployments outside of the continental United States, but Commissioner Navarro wants to change that.

“Members of our armed services should be protected from the ‘patriot penalty’ regardless of the specific location of their deployment,” stated Commissioner Navarro, who also intends to remind insurers of their existing legal obligations and responsibilities to residents who serve overseas and their accompanying spouses via a formal bulletin to the insurance industry, stating that the practice is “illegal in Delaware and is punishable to the full extent allowed under the Delaware Insurance Code.”

The department encourages residents to share this information with military members and their families to increase awareness and caution when reviewing auto insurance rates and quotes. Anyone who thinks that they may have experienced a “patriot penalty” is urged to contact the department right away. Should individuals come forward with this concern, the auto insurance company where this occurred will be investigated thoroughly and appropriate action will be taken if the company is acting contrary to Delaware law.

Contact the Delaware Department of Insurance by visiting insurance.delaware.gov, emailing consumer@delaware.gov, or calling (302) 674-7300.

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Captives reduce taxpayer burden

Insurance Commissioner Trinidad Navarro announced data showing a strong year of captive insurance formations in Delaware, with 56 licenses provided in 2019, outpacing previous years. “The success of Delaware’s captive insurance program is reflective of the hard work of Delaware’s captive staff in applying firm but fair regulations and finding innovative ways to improve client experience,” said Commissioner Navarro.

Of the 56 licensees last year, 52 licenses were issued conditionally. Conditional licenses are an innovative form of licensing offered by the state since 2018. This cutting-edge form of licensing allows certain captive owners to obtain a license on the same day as applying.

“When I assumed office, I recognized the necessity to streamline a number of our processes. Creating the conditional license has helped make Delaware one of the most attractive domiciles for captive insurance,” explained Commissioner Navarro, “By bringing in these companies, we have been able to generate a substantial surplus revenue that reduces taxpayer burden and strengthens our economy.”

In 2019, Delaware’s robust captive insurance program contributed $3 million to the state’s General Fund and $1 million to the City of Wilmington. The dollars contributed to the General Fund reduce the tax burden for every woman, man, and child in the state by $3.10. Wilmington residents’ tax burden is reduced by $17.22 total per person – a family of four in Wilmington saves $68.88 per year because of this program. Since Fiscal Year 2014, the program generated $20.7 million in surplus revenue. A 2016 study conducted by University of Delaware found that the captive insurance program contributes $359 million annually to Delaware’s economy.

The success of the Captive division continues to earn international recognition. In 2019, Delaware was named a finalist for Non-Asian Domicile of the Year by leading industry magazine Captive Review. Steve Kinion, Captive Insurance Director, was again named to Captive Review’s global Power 50 rankings as one of the top 10 most influential international captive leaders.

Captive insurance companies, which are owned by the entities that they insure, are usually formed by businesses that wish to better manage the cost and administration of their insurance coverage. Delaware is the world’s fifth largest and the third largest U.S. captive domicile. It is one of four domiciles in the world recognized by the International Center for Captive Insurance Education as ICCIE Trained. To learn more, visit captive.delaware.gov.

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Workplace Safety Program saves $7.6 million for participants

The Delaware Department of Insurance has analyzed new filings from the state’s top writers of workers’ compensation insurance after announcing the third consecutive year of decreased rates in November. The top writers represent nearly 10,000 companies that hold policies within the state. Policyholders of these companies will see a total premium impact of more than $3.7 million, and when the entire writer universe is included, the Department expects realized savings of more than $4 million.

“Delaware businesses large and small are seeing decreased premiums from the third consecutive year of workers’ compensation rate decreases, and that benefits everyone,” said Commissioner Trinidad Navarro. “We will continue to work to make sure that Delaware has an inviting atmosphere for businesses and safe environments for employees.”

Technology Insurance Company, Inc.’s filing shows that their reduction will save policyholders a total of $845,594. Wesco Insurance Company’s total premium change of $651,721 takes the second-place spot for savings, while eight other top insurers are reporting six-digit premium impacts. Of the state’s top writers, American Zurich Insurance Company filed with the largest overall percentage rate impact, a decrease of 17.50%, with five other companies posting double-digit drops.

While realized savings will vary business to business, more discounts can be accessed through the Workplace Safety Program offered by the department. In 2019, 1,119 companies participated in the program, saving a combined $7.6 million through safety credits on their $72.9 million employer premium total – a savings of more than 10%. Businesses can earn discounts of up to 19% by providing and maintaining a safe place to work. More information on this program is available at insurance.delaware.gov/services/workplacesafety.

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Consumers won nearly 90% of arbitration cases in 2019

The Delaware Department of Insurance announced that its arbitration services program earned residents $839,466 in awards during 2019. Considering overlap from the previous year, 354 settlements occurred, and 144 cases were heard. Residents prevailed in about 90% of all cases. In total, the Department opened 502 cases last year.

“Arbitration is one of the many pro-consumer tools our office provides to the public,” said Commissioner Trinidad Navarro. “We want residents to know that when an insurance company isn’t working with them on an issue, they can come to us for help instead of using their hard-earned money to hire a lawyer and spend too much valuable time on the problem.”

The arbitration services offered by the department allow all residents to pursue solutions to auto, home, and health insurance-related issues without requiring the consumer to have the ability to obtain and afford an attorney. These services can assist with insurance disputes when companies will not pay or are offering an unacceptable amount for things like medical costs, lost wages, and car and home damage. Arbitration involves filing a formal complaint against a company to be reviewed and decided by independent experts. While department arbitrators do not provide legal advice, they do guide members of the public through the informal process. The process takes about 90 days, which is much quicker than court cases.

“Imagine driving off a car lot in a newly purchased vehicle, only to have that joy and excitement is shattered by a car accident just days later. Your insurance company offers you only a small portion of the car’s worth and is unwilling to work with you on the claim. You may be awarded a claim by your insurance company – but you don’t have to accept it. By reaching out to the Department of Insurance, the arbitration team can engage the insurance company on your behalf to help you get a more acceptable payment,” said Commissioner Navarro.

The department recommends contacting the Consumer Services Division for assistance interacting with the insurance company, as this service is available to residents who have previously attempted to solve the matter with an insurance company multiple times. Arbitration request forms and more information can be found at insurance.delaware.gov/services/arbitration.

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Fraud Bureau saw a 10% uptick in reports last year

The Delaware Department of Insurance made great strides in fraud detection and response during 2019. Throughout the year, 6 criminal arrests that included 21 charges were recommended from the Department’s Fraud Prevention Bureau to the Department of Justice, and 16 civil cases were brought forward resulting in more than $21,000 in fines. The Bureau received 551 referral cases in 2019.

“I want to commend our Fraud Prevention Bureau for their work identifying deceitful activity and helping to bring those who would defraud Delaware residents and companies to justice. Their efforts continue to send a strong message that fraud will not go unnoticed here, which can prevent future crimes,” said Commissioner Trinidad Navarro. “Through this work, we can help keep insurance premiums from rising by helping to make sure companies do not have to pay out fraudulent claims.”

Commissioner Navarro, who has a background in law enforcement, served as Vice-Chair of the National Association of Insurance Commissioners’ Antifraud Task Force over the last year and has championed fraud awareness and reporting. He was named Chair of the national Antifraud Task Force last week. The Department has experienced an increase reports over the past several years, with an approximate 23% increase since 2015.

In one prominent 2019 case, a resident was arrested after posing as family member who was terminally ill and facing imminent end-of life to open a life insurance policy. This was conducted through forgery of the family member’s identification, confirmation, and consent. After naming themself the sole beneficiary, the individual then attempted to collect $50,000 on the policy two days after the family member’s death. Charges included insurance fraud, identity theft, second-degree forgery, and crime against a vulnerable adult.

From identity theft to insurance healthcare fraud, hundreds of tips are investigated every year. In 2019, the most common schemes were seen through the application for auto insurance process, with individuals living outside the state attempting to save on premium costs by using Delaware addresses. Suspected to have risen due to possible economic factors, instances of application submissions occurring after an accident took place also grew. In addition to investigating tips from the public and insurance companies, the Bureau works with law enforcement in locating life insurance policies in death investigations.

The Fraud Prevention Bureau is fully funded by annual assessment fees, not taxpayer dollars, and employs 13 fulltime staff with extensive law enforcement and insurance investigative backgrounds and training, including credentials as Certified Fraud Specialists and Accredited Healthcare Fraud Investigators.

The Bureau facilitates the detection of insurance fraud and works to reduce fraud occurrence through enforcement and deterrence. Additionally, the Bureau requires restitution for deceptively obtained insurance benefits, and by doing so reduces the amount of premium dollars used to pay fraudulent claims, in turn decreasing the likelihood of premium increases.

The Delaware Department of Insurance Fraud Bureau can be reached toll free at (800) 632-5154, or (302) 672-7350, or by emailing fraud@delaware.gov. Reporting known or suspected fraud is free of charge and can be done confidentially.

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