The New York State Department of Financial Services (DFS) has fined Arch Insurance Company and National Union Fire Insurance Company of Pittsburgh, Penn., a combined total of $2.2 million in fines and ordered the insurers to provide a combined $8 million in retroactive rebates for violations of New York Insurance Law.

Separate DFS investigations found that both insurers failed to satisfy required minimum loss ratio standards in blanket accident and health insurance policies issued to hundreds of New York volunteer firefighter districts, departments and companies, and National Union Fire charged premium rates that were not filed with DFS.

The violations resulted in the New York volunteer firefighter companies being overcharged premiums in the aggregate amount of nearly $8 million.

“Insurers doing business in New York must comply with New York insurance laws and regulations, and those who don’t will be held accountable for their actions,” said DFS Superintendent Maria T. Vullo. “…DFS is holding both Arch Insurance Company and National Union Fire Insurance Company of Pittsburgh, Penn., responsible for their respective compliance failures, which directly resulted in New York volunteer firefighter companies paying insurance premiums for coverage that did not bear a reasonable relationship to the benefits provided under the policies.”

A DFS investigation found that between 2011 and 2017, Arch issued 3,332 blanket accident and health insurance policies to 628 New York firefighter companies and failed to comply with the minimum loss ratio standard required by New York insurance regulation, which provides that the premiums must be reasonable in relation to the claims paid under a policy. As a result, the volunteer firefighter companies were overcharged premiums in the aggregate amount of $5.3 million during the period.

Under the consent order signed January 10, Arch will pay DFS a fine of $1 million and provide retroactive rebates to each affected New York firefighter company reflective of the company’s portion of the $5.3 million minimum loss ratio shortfall. In addition, Arch will provide to DFS an up-to-date, detailed summary of corrective actions taken and will report to DFS by May 1, 2019, for the next five years containing experience data for each blanket accident and health policy form issued to New York volunteer firefighter companies during the prior calendar year.

DFS’s investigation of National Union Fire found that from 2015 to 2017, National Union Fire also failed to comply with the minimum loss ratio standard required by New York insurance regulation, which provides that the premiums must be reasonable in relation to the claims paid under a policy. In addition, from 2015 to 2018, National Union Fire charged premium rates on its blanket accident and health policies issued to New York firefighter companies that were not filed with DFS.

National Union Fire’s failure to maintain minimum loss ratios in compliance with Insurance Law resulted in certain New York volunteer firefighter companies being overcharged premiums in the aggregate amount of $1,571,704. The insurer’s failure to use the premium rates on file with DFS resulted in certain firefighter companies being overcharged premiums in the aggregate amount of $1,213,640.

Under the consent order, National Union Fire will submit blanket accident and health policy forms and premium rates for DFS’s review and approval that will replace all existing coverage issued to New York volunteer firefighter companies, send notice to the impacted companies of their retroactive rebates and by March 15, 2019, provide proof to DFS that each affected volunteer firefighter company has been provided retroactive rebates reflective of the company’s portion of the $1,571,704 minimum loss ratio shortfall.

In addition, National Union Fire will pay DFS a fine of $1.2 million and provide retroactive rebates to each affected New York firefighter company reflective of the company’s portion of the $1,213,640 for the use of unapproved premium rates.

National Union Fire will also provide to DFS an up-to-date, detailed summary of corrective actions taken, and will report to DFS by May 1, 2019, for the next five years containing experience data for each blanket accident and health policy form issued to New York volunteer firefighter companies during the prior calendar year.

Source: New York State Department of Financial Services