Calif. Regulators, Disability Insurers Negotiate Settlement

The California Department of Insurance and groups representing disability insurers have negotiated a settlement agreement that could resolve a dispute over California disability policy standards.

California regulators triggered the dispute in October 2005, by announcing that they would deal with concerns about certain types of disability policy provisions, such as provisions giving the issuers full discretion over interpretation of policy terms, by using written notices to withdraw approval for existing policies.

California regulators now have agreed to let insurers continue to use group disability policies containing discretionary clauses while a San Francisco state court case, Hartford Life Insurance Company vs. State of California, is in progress.

But, under the terms of the proposed settlement agreement, California regulators could start enforcing some other provisions, such as provisions governing policy definitions, about 60 days after the agreement takes effect.

At press time, the parties that negotiated the agreement were in the process of getting court approval for the proposed settlement.

California Insurance Commissioner John Garamendi says the proposed settlement agreement “provides significantly more protection for consumers from arbitrary and harmful practices within the industry.”

Representatives from trade groups that have been fighting California’s disability policy regulatory efforts also are welcoming the proposed settlement.

The California agreement “gives our members a clearer definition of the ground rules under which we can make our products available in the state,” says Karen Ignagni, president of America’s Health Insurance Plans, Washington.

The American Council of Life Insurers, Washington, “is committed to working with [California department] staff to implement this agreement and resolve any concerns they may have about approving these policies,” says John Mangan, an ACLI regional vice president.